And what you can do about them
It seems like at this time each year, someone’s talking about what this year’s trends will hold. Whether it’s the colour of the year (it’s Pantone’s Viva Magenta, if you’re wondering), what technology is on the rise (Chat GPT) or what the upcoming elections are likely to have in store for us (BBQs and cake stalls will likely be staging a comeback!).
But this year, there are a series of trends that might not have crossed your radar thus far that we thought were worth taking a closer look over this and possibly the next blog.
It’s what we’re currently in. And no, that’s not a typo. It’s a phrase coined by McCrindle research that highlights the somewhat odd space we find ourselves currently in. It’s not quite a full blown recession, but it sure feels like it, with interest rates rising rapidly, the cost of living going up thanks to inflation and the household surplus we heard so much about that resulted from Covid is well and truly tightening up. The real saving grace here, and possibly a silver lining, is that Australia is experiencing record low unemployment, also known as a job seeker’s market in that generally Australian jobs aren’t being cut as we’re seeing happen in other countries.
That doesn’t stop us worrying though. McCrindle’s research showed 57% of Australians are concerned or very concerned about rising interest rates. 60% are worried about global uncertainty and more than two thirds of us are concerned about the cost of living.
Without being too flippant, my take on all of this now with a couple of decades of watching financial horizons is that this too shall pass. That’s not to say put your head in the sand and ignore anything that’s cropping up. Absolutely action the things that need to be actioned. Contact your mortgage broker or banker to review your rates, which should be done as a matter of course every 12 months or so. Plus review your budget to tighten where you can and save what you’re able. And, if you’re really struggling, say to pay your mortgage, banks have an obligation to help you access financial hardship programs; a great place to start is here. If you get no joy from your bank, you might also try a financial counselling service like the not-for-profit National Debt Helpline. The key here is if things are starting to get hard, seek help as early as you possibly can.
If you are a business however, you might want to start watching your industry sector’s horizon. I was speaking with a friend who has spent some time in ecommerce logistics. She’s seeing what was once a land rich in undisciplined cowboys riding what seemed like a never-ending Covid induced wave of internet shopping, now facing significant market tightening and consolidation. My sense is that there’s a goodly possibility that there will be quite a bit of that happening in other sectors too. But consolidation often brings with it interesting opportunities for those who are ready, financially and otherwise, to chase them. Start thinking what an opportunity might look like for you, so you can better recognise it when it comes along.
The market and its consumers are moving from demanding the cheapest products to being far more mindful of what they’re consuming and where it has come from. So, these days it pays for businesses and business owners to really think about how they can be more sustainable. However, it needs to run so much deeper than just saying your business is sustainable, enviro-friendly or that your products are ethically sourced. Otherwise, you could be thought to be guilty of the kinds of greenwashing we saw in the early 2000’s – except back then rampant social media folks, naming and shaming companies who talked the talk, but didn’t walk the walk, didn’t exist. These days transparency and authenticity is critical for long term business success.
So where might you start? Start with your supply chain. Do you know categorically where your manufacturing resources are sourced and by whom? Recent research showed 40% of companies had no idea where their products or inputs came from. It’s best not to assume. Rather ask and then require proof of provenance. One of the things you’re especially looking for is compliance with the Modern Slavery Act 2018 which is legislatively required for Australian companies earning $100M or more. However, regardless of your business’ size and turnover, do you really want to base your business’ success around the suffering of women and children, beaten and/or locked in a sweatshops? Yep, didn’t think so. Check your entire supply chain. Better still, if you can, visit your suppliers and see for yourself.
But it’s not just for businesses importing products, it’s also for those of us utilising Australian inputs. Wherever you can, support Australian farmers and shop local. Maybe even review the companies your superannuation fund supports to see if they’re doing the right thing from an ethical perspective and if not, vote with your money and invest elsewhere – yes, in many cases you have that choice.
Preparing for intergenerational transfer
You might not be aware of it, but Australia is at a most interesting place in time. We currently have six generations in existence and some of them are experiencing a bit of a coming of age. Whilst there are still a number of the Builder generation (in their late 70’s-90s) they make up a tiny percentage of the workforce and as a consumer base, their presence is shrinking, especially in comparison to the Boomers, around 20% of whom are still in the workforce. However, many Boomers are in their prime cash consumption years rapidly heading toward the retirement they’ve been dreaming of (in their 60’-late 70’s). Gen X (in their late 40s-50s) meanwhile are often called the sandwich generation, having to look after both older kids and ageing parents all whilst still contributing to the economy in the form of work in their prime earning years, many of whom are moving into organisational leadership roles. Generation Y (often called millennials, which used to mean ‘young people’) are now well into in their 30s and 40s and dealing with the harsher realities of life like rapidly rising mortgage rates, property prices, careers, kids and ageing boomer parents. These guys are in their prime credit consumption phase.
But it’s the newest generations (Gen Z and Alpha) that are making the biggest waves. Gen Z (in their late teens and 20s, early 30s), 1 in 2 of which have a uni degree (and the debt that goes with that) are now entering the workforce. However, they’ve been privy to seeing parents go through the GFC, Covid, and hearing they’ll be replaced by machines, etc and aren’t necessarily convinced the deferred life plan (work hard for 40 years saving the having of fun for retirement) is necessarily a life well-lived. They want greater meaning from their work and they’d like it to happen preferably now. They’re also realising the age old Australian dream of owning a house, might now be mostly out of reach. And Gen A or Alpha, one of the largest generations since Y, are now tweens & teens. They’ve grown up with social media and that’s how they prefer to buy anything and they wield incredible purchasing power.
So why is any of this important to business owners? A couple of reasons. The first being knowing who your business’ target market is and what’s important to them at any given point in time is likely to make your offering resonate a great deal more and hence the likelihood of purchase greater. Also, an understanding of the critical junctures (careers, kids, houses, retirement, etc) in your customers’ lives will help you understand what they’re looking for now and next and enable you to better meet that.
But, perhaps, more importantly, have a look around your workplace and think about what your staff/co-workers need most of all. Maybe it’s more flexibility (X and Y), more skills to help them do a better job (Y & Z), greater respect regardless generation. Often we see a bit of a generational bashing and lack of respect in operation (remember Ok Boomer?). Each generation needs to draw on the strengths of those who’ve come before, but also those who come after. Focus on appreciating what someone from a different generation brings to the table and build respect up and down in your business and see what comes. It’s not just about transferring wealth across generations, it’s also about transferring information, skills and experience. Do that, and you’ll be a legend, regardless of which generation you belong to.
Of course, if we can help you move your financials forward by helping you transition to retirement, or into your own business, or your existing business to cloud accounting with Xero, or simply looking after your tax affairs, we’d love to help. You can call us on 6023 1700 or connect with us via Facebook or LinkedIn.
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