November 29, 2022
Over the past few months, there has been some buzz about the direction of the global economy. In conversations, many business leaders will express deep concerns about inflation and the onset of recession. Yet, when asked about their financial performance, most say, “Business is doing well!”
There is a clear disconnect between economic expectations and individual business outcomes in these discussions. Why is it that we think things are getting worse when they are actually getting better? Maybe it’s a long-term hot stock market, combined with an unusual bit of defensive self-preservation.
Most of what one reads about the economy or corporate earnings is compared to year-over-year results. However, in my experience, last year’s numbers say just as much about last year as they do about this one. How was last year? was it good Or, better, was it just a recovery year from an underperforming baseline of pandemic conditions?
For the most part, reports of price hikes and runaway corporate profits abounded. To be sure, inflationary pressures lead to higher prices, but simply comparing this year’s prices to last year’s prices greatly simplifies the negotiation.
Bottom line improvements are a combination of price and volume differences. After two and a half years of pandemic-induced recession with severe supply chain disruptions, many businesses are returning to normal or what is often called the “new normal” of sales volumes. It’s been a while since supply and demand were really anywhere near balance.
Meanwhile, many companies continue to take advantage of cost-cutting measures due to the pandemic. It’s no surprise that rising inflation rates quickly trickle down to the bottom line. Simply put, business is better.
Several quarters of economic contraction with no real deficit, followed by a better quarter. A few months of rising prices, followed by a gradual increase. Near full employment, resulting in problems in recruitment and employment. However, the profits of most companies are high. Compared to the outlook a few years ago, we should be thankful for the current economic conditions.
At the same time, along with the new normal is what one might call “the new networking.” Almost three years of zooming has left most of us zoomed out. Fortunately, private business events are starting to make a comeback—it’s a little different now. After a long break from personal networking, the biggest difference is that there are many new faces in the crowd. Most of the people who attended almost every business meeting seem to have retired, changed jobs or otherwise moved away during the pandemic.
New faces are a good thing. As we reset and start over in 2023, a whole new generation is coming through the workforce. Think about the “weak network” theory – basically this means that the less tightly connected the people you meet to those you already know, the more likely they are to offer you a full range of business opportunities. Bring to a new set. With that in mind, you can expand your network and possibilities to meet our 100 people in 2023, which includes some new and interesting people you should get to know better.
This month we are also proud to feature Jim McGlothlin as our 2022 Virginia Business Person of the Year. (Read the December 2022 cover story.) McGlothlin’s business acumen, achievements and philanthropy are legendary. This is the stuff great stories are made of, making him the kind of person you really want to see.
As 2022 draws to a close, I would be remiss if I did not thank all of our readers and advertisers for the role each of you plays in the Commonwealth’s economic success. Because of you, business is better for all of us!