2024 Business Trends: Challenges, Strategies & Goals

Have we made it through the recessionary storm? The verdict is still out on that. Labor shortages are softening, and executives have an eye on modest growth for 2024. They are pursuing the rollout of new products and services as well as new markets. They understand the importance of technology investment for efficiency and productivity measures, but investment in nonessentials will be modest. There is a cautiously optimistic sentiment among business leaders for 2024.

In this annual outlook report, we offer perspectives on the business landscape over the last 12 months and impactful trends for 2024. We dive into key strategies and goals that can support a more robust operational and financial model for business leaders as they face rapid change.

The Rapidly Changing Business Environment

With continued concerns about a pending recession and inflationary pressures, businesses across industries are showing cautious optimism that the state of their business will improve over the coming year. Over two-thirds of businesses have experienced increased costs and are concerned about access to capital and financial security. Businesses continue to hire despite increased labor costs and will look for cost savings and profitability through productivity and efficiency measures.

Top Business Challenges

Limited access to capital coupled with high interest rates are the top concerns for business leaders in our survey when it comes to growth and increasing profits. Few leaders are optimistic about conditions improving due to the specter of a looming recession. Executives cite increased labor costs and the inflationary effect on materials and supplies costs as their biggest challenges for improving profitability. While companies are doubling their efforts to retain and hire new talent, larger companies cite their biggest barrier to growth to be adequate staffing.

“Like essentially all businesses, increased revenues are, to a certain extent, a reflection of the current economic environment. However, we are also focused on increasing revenue by capitalizing on our diverse service offerings and our expertise in key industries. While healthcare makes up 30% of our overall practice, we continue to see significant growth in other industries such as technology. Private equity continues to be a driver of new business in both of these industries as well as with traditional manufacturing and distribution enterprises. These businesses are well suited for our multiple-service offerings.” JIM MEADE, CEO, LBMC, PC

Access to Capital

Almost half of business leaders in our survey expect that access to capital/business loans and credit will get worse over the next six to 12 months. A little more than half of leaders say that their financial security should stay about the same over that period, with 29% believing that it will be somewhat or much better.

There is a possibility that many businesses foresaw rising interest rates and obtained business loans or new lines of credit at lower than current interest rates. There also appears to be a trend in reducing nonessential expenses that range from canceling internal events and employee social experiences to reducing the need for travel. However, one budget area that was previously considered nonessential — marketing and advertising — is staying intact and expanded in 2024.

Many Are Concerned About US Economy, Yet Few Are Towards Nashville’s Economy; Half Are Worried About Access to Capital, Loans and Credit

General Concerns

Access to Capital - General Concerns

Adequate Staffing

Finding and hiring new employees to fill open positions continues to pose challenges for business leaders. Despite this, expansion into new markets and the introduction of new products are driving companies across all sizes to continue increasing their hiring efforts over the coming year.

Larger companies (those with 100 or more employees) have had an easier time finding and hiring talent, although they still face some obstacles in this endeavor. As previously noted, they increased headcount over the past 12 months. These businesses will continue to pursue increased hiring efforts over the coming year to fill new positions.

Level of Difficulty in Hiring Over Past 12 Months

Level of Difficulty in Hiring Over Past 12 Months

“We are very proud of the investment that we continue to place in the professional and personal growth of our LBMC people. They are the cornerstone of our business. The foundation of exceptional client experience. We were just recognized for the fourth year in a row (by GreatPlacesToWork.com) as being a national GPTW with 93% of employees at LBMC saying it is a great place to work compared to 57% of employees at a typical U.S.-based company. We are purposeful in their development, focusing not only on technical expertise, but also in preparing them for leadership roles at all levels. Coaching and mentorship are integral to our internal relationships as is transparent communication.” JIM MEADE, CEO, LBMC, PC

National Economic Landscape

The top concern among most business executives in our survey is the state of the U.S. economy. Further, 70% of executives in our survey expect the national economic conditions to continue to deteriorate at least through the second quarter of 2024.

Because of national economic conditions, business executives worry about continued inflation and cash flow. Almost half of the executives in our survey don’t believe that consumer confidence will improve in 2024.

Few Foresee the US Economy or Access to Credit Improving Over the Next Six Months; Three in 10 Anticipate Financial Security Improving

Change in Conditions Over Next 6 Months

Growth Opportunities and Optimism

Despite national economic conditions and concerns about inflation and access to capital, three quarters of business leaders in our survey expect company revenue to increase over the next 12 months. They cite new product and service development as well as the entrance into new markets as reasons for cautious optimism. Leaders are far more optimistic about their local economy than they are about the national economy, and they anticipate fewer challenges in finding and retaining staff than they had a year or more ago.

Employers are investing in employee training and development, technology adoption/upgrades and increased marketing/advertising budgets to support talent attraction and revenue growth in the coming year.

An election year creates volatility within the markets, and we anticipate that business leaders will need to focus on core operational, customer and staff engagement to maintain financial and business security through 2024. Leadership stability, lower turnover and improvements in productivity and cash flow will help them maintain optimism and momentum toward business goals.

“Young professionals of today want to feel like they not only belong, but that they are key to the success of the organization. They want relationships with decision makers and to have big picture insights as to how they fit in the enterprise. We continue to refine a flexible/hybrid work environment without sacrificing the development of our people or client service.” JIM MEADE, CEO, LBMC, PC

Business Performance / Strategies

With top planned investments in employee training and development and technology adoption/upgrades for productivity and efficiency, businesses are reducing expenses for nonessentials and previously planned investments. However, one significant business strategy is acquisition activity. One-third of leaders in our survey are entertaining target acquisitions to grow their company and staff. Among businesses with more than 100 employees, the potential for acquisition activity is 43%.

Sales & Profitability Strategies

As anticipated in our last survey, executives are shifting their sales model. In the past, they were selling existing products to existing markets. Now, they are ready to sell new products and services to diversified customers and geographic markets. Optimism has rebounded to move forward with expansion plans even as companies limit certain investments or cut back on nonessential items and activities.

In response to inflation and increased costs, almost half of the businesses we surveyed have already raised the prices of their goods and services. Leaders also cite raising prices as a preemptive strike toward a future economic downturn. Increasing their cash flow and profits now can help them build reserves. Only 14% of businesses surveyed are considering taking on bank debt to support their growth strategies. However, 24% of employers with less than 100 employees did apply for a business loan or line of credit in the past year to cover costs and maintain their access to capital.

Roughly Half Have Already or Have Plans to Invest in Employee Retention, Reduce Spending on Non-Essentials, and Raise Prices of Their Goods/Services

Business Plans

Capital Spending

While larger companies with 100 or more employees are increasing profitability through spending on productivity and efficiency measures, companies with $10 million or less in revenue are mainly seeking profitability through increasing their pricing It is interesting to note that about 15% of leaders surveyed are investing in better employee health and financial benefits, likely to attract and retain talent.

Technology adoption and upgrades are a high priority for all businesses, including data analytics, AI, and cybersecurity/information security upgrades.

Acquisitions and expanding to a new location are among other plans for capital spending in the coming year.

“Is your firm looking to acquire another company? If you are, understanding the structure of the entity you are acquiring is important. A quick review of the organization type before LOI should indicate whether tax basis step-up will be difficult (or not even possible).” JAYME PARMAKIAN, CPA, SHAREHOLDER, TAX SERVICES

Areas of Focus for Capital Spending Include Employee Training/Development, Technology Adoption/Upgrades, and Marketing/Advertising Efforts

Areas For Capital Spending Increase Over Next 12 Months

Technology Enhancements

Technology adoption and upgrades are the second most important capital investment in the coming year across all industries, according to our survey.

Business executives view technology enhancements as a solution for improved margins as well as workforce shortages. Investments in technology include productivity and efficiency solutions, client service improvements and cybersecurity. There is continued interest in automation, business intelligence and AI for efficiency as well as customer service enhancements, but investment is varied across industries.

The Top Cited Plan for Increasing Profitability is Via Improving Margins/Revenue Through Productivity and Efficiency

Strategy for Increasing Profitability

“AI adoption is much like the adoption of any new technology or process in a company. Following a deliberate plan and taking measured steps in innovation are the key to unlocking AI’s potential. A good way to think of AI adoption is to apply a three-step approach:

Strategize: Find the area or business process that is the best place to start with AI adoption. This would likely be a highly manual process or one that involves reviewing a lot of data or forecasting the future based on historical data.

Organize: After finding that first business process, get your data “AI ” This means understanding how data flows through that process, who handles that data, and where it is stored. Next, the data needs to be organized and structured in the cloud to be available and accessible by AI models. As long as data remains scattered, unorganized, and stored in various systems, it will remain inaccessible to AI models. Think of data as the fuel for an AI engine.

Apply: Start experimenting with AI, even with small subsets of This is about learning and innovating on a small scale to move into larger-scale applications.

You can follow this framework to scale AI across your organization. An additional strategy will need to be developed to create a roadmap of which business processes and areas you will address based on business prioritizations.” JON HILTON, SHAREHOLDER, CONSULTING & BUSINESS INTELLIGENCE

Mergers & Acquisitions

One third of companies across all industries in our survey are viewing target acquisitions as a solution for growth in the coming year. Interest in growth acquisitions is slightly larger for companies with 100 employees or more (43%). About 10% of companies across industries are open to merger activity specifically.

Regulatory scrutiny will continue to limit larger deals amid concerns about national security and competition. However, analysts see an increasing trend in smaller, industry-diverse M&A deals, meaning that companies will acquire complementary businesses to enter new markets and drive growth.

Private Equity Activity

Deal-making in 2023 is viewed as the start of a five- to eight-year growth cycle for private equity. Anticipating a sell-off of lower quality investments, PE firms will “bet on the bottom” despite lingering market uncertainty through 2024.

Only 5% of our business executives surveyed expect an infusion of cash from private equity firms; however, analyst predictions reflect the optimism of these executives to focus on growth and vision for 2024.

“On the PE/VC side, the rising cost of capital and market uncertainty are major concerns. As interest rates increased, it became more expensive to leverage acquisitions and investments, which could have led to lower returns on investments. Market volatility and uncertainty also makes it harder to accurately assess the value of target companies, which has resulted in delaying both acquisitions and portfolio exit plans.” JIM MEADE, CEO, LBMC, PC

Key Business Topics

Acquiring/Retaining Talent

Executives across industries are citing the acquisition and retention of talent as a top priority for 2024. Although large companies of 100 or more employees are less concerned about their ability to find and hire talent, they acknowledge the importance of retention through training and development, competitive benefits and lighter workloads/flexibility.

Companies view hiring as critical to growth, with 52% citing expansion into new markets and 44% citing new products or services as their reasons for hiring in 2024. This indicates a strategic rather than reactive approach to hiring.

“The fact a company’s greatest asset is people still rings true. We are seeing the talent war continue as it relates to skilled, experienced professionals in most industries, even though you may hear the labor shortage is softening overall. Be mindful we are still at a 50+ year low unemployment rate, coupled with a smaller workforce in general due to population changes over the years. Employees are seeking “work-life integration,” and many are unwilling to take positions unless they have a hybrid work component or afford some flexibility. An effective onboarding process is important now more than ever, especially given that remote arrangements are the norm on some level for most companies. Proven, experienced professionals still tend to have multiple opportunities to choose from; therefore, the companies and leaders who value culture and keep it at the forefront will have a better chance of retaining top performers.” SHERRIE WHATTON, PRESIDENT/CEO, LBMC STAFFING SOLUTIONS

Training & Development

To attract and retain talent as a long-term strategy, 33% of companies will invest more capital in employee training and development. This makes sense as growth strategies involve new markets and the rollout of new products and services. In addition, the need to train and develop employees will be an ongoing strategy to fill skill gaps, even among highly skilled employees.

Over Two-Thirds Plan to Increase the Size of Their Workforce Over the Next Year

Talent Acquisition Plans Over Next Year

Technology Usage

In our survey, 14% of business executives anticipate new technology adoption and improvements to support increased profitability in 2024. This indicates that executives are still viewing technologies as tools rather than an overall business strategy. Even though top technology trends are focused on strategic technological advancements for business, use cases are still in the proving stages. For now, technology investment is focused on efficiency, cybersecurity and marketing and advertising.

“Technology clients (such as software-as-a-service providers) have significant cash needs to support sales growth and the continuous development of software/ products. The cost of capital/debt has become, or is becoming, a significant challenge for earlier-stage technology entities.” JIM MEADE, CEO, LBMC, PC

Cybersecurity/Artificial Intelligence

Across industries, companies have concerns and are developing policies regarding the use of artificial intelligence in business processes. This concern seems to correlate with higher investment in data security and cybersecurity platforms. The potential for AI to disrupt every industry is clear, and executives will focus on the weaknesses and threats of such technologies before they explore their strengths and opportunities.

“Given the rapid increase, sophistication, and cost of ransomware attacks, IT security issues are now operational issues that can halt the ability to conduct business. Without proper preparation and investment in cybersecurity protections, a company’s bottom line can be greatly impacted.” BILL DEAN, CCE, GPEN, GCFA, GCIH, PCIP, SHAREHOLDER, CYBERSECURITY

Marketing & Advertising Spend

Competition across industries is pushing digital marketing and advertising to the top of capital investments in 2024. Companies are ready to explore and adopt social media advertising, search engine marketing and content marketing, investing in multi-channel approaches to reach multi-generational audiences.

Areas of Focus For Capital Spending Include Employee Training/Development, Technology Adoption/Upgrades, And Marketing/Advertising Efforts

Areas for Capital Spending Increase Over Next 12 Months

Outlook

Our survey shows that 2024 will be a year of cautious optimism with a focus on revenue growth and profits despite concerns over the national economy, inflation and long-term labor shortages. Executives are primed to explore strategic acquisitions while keeping a short leash on operational expenses.

Any capital expenditures will be growth focused in the areas of talent, marketing, efficiency tools and security. With a stable C-suite and stabilizing workforce, companies will avoid taking on debt while rolling out new products and services and expanding their market reach.

Leaders want to harvest profits before global pressures and election results change the game. They will maintain confidence in their local economies and business vision to stay the course.