What Can We Expect in 2007?
"I never think of the future," Albert Einstein reportedly said. "It comes soon enough." Unfortunately, businesspeople can't share this philosophy. Companies setting budgets at the end of one year must always go through the exercise of predicting the future, even if it's only in the short term and even if they reassess and adjust spending throughout the year.
The consensus among economists is that the economy will continue to grow in 2007, although at a lower annualized rate of about 3 percent. Few people are predicting wild swings in inflation (thanks to lower fuel and auto prices), which suggests that interest rates will hold steady. Unemployment is expected to rise, although the labor market will remain tight.
It's not hard to find entrepreneurs who are optimistic. Many businesses are in serious hiring mode, a sign that they feel confident that their companies will expand enough to support the increase in overhead. What other trends are entrepreneurs seeing in their industries and regions? Here are predictions from some of the smartest business owners we know.
Hiring's on the rise, which will drive wages up
Martin Babinec, CEO and president of TriNet, a provider of human resources services, based in San Leandro, California, says that his customers' payroll data suggests cause for optimism.
"We're seeing an increased rate of head count expansion among our customers. In 2006, for every 100 employees in our system, six more were added over the course of the year. In 2007, we're projecting the growth rate to be higher still. The market is shifting in favor of the candidate and away from the employer. We haven't yet seen much wage pressure reflected in customer data, but my gut tells me that wages will be going up, too.
"Another metric we keep an eye on is the total value of bonus payments made in December. Because we process payroll, we see what people get paid. The final numbers aren't in yet, but I think we may see a 50 percent increase in bonuses in 2006 over 2005.
"In terms of my own business, our wages are going up and we are planning on adding positions. We also have 27 existing positions that are open out of 300 total jobs, and we have faced more difficulty filling vacancies. Our revenue was a little ahead of last year's, but on an income basis we did much better because we had so many open positions."
Even more employees will work from home
Mary Naylor is the founder and CEO of VIPdesk, a company based in Alexandria, Virginia, that provides outsourced customer care services and will surpass $20 million in revenue this year.
"The pendulum is definitely swinging back in favor of the candidate over the recruiter. As the market tightens, I think you'll see an explosion in home-based employment. Hiring home-based workers allows a business to radically expand its recruiting pool to go after highly skilled workers anywhere in the country. Suburbs are especially good for this. We find that we're having a lot of luck recruiting people in the younger suburbs of Atlanta, Dallas, Houston, and in Florida, where people are fed up with commuting. Home-based employment will also grow as more companies realize it's a way to lower overhead costs and to enhance business continuity. After seeing what happened with Katrina, a lot of companies think it makes sense to have a work force that's dispersed."
A cooling housing market will lower supply chain costs
Dan Sanker is the CEO and president of CaseStack, a $70 million logistics company based in Santa Monica, California.
"Normally the fourth quarter is the busy season, but this year, the trucking companies are saying that the busy season never came. The drop-off in business has been particularly noticeable in shipments of houseware products. Some of it may be due to a cooling off in the housing market. Homeowners spend less on their homes when they think they're worth less. As we move into January, February, and March, retail slows down, so this trend will probably continue, which will present some opportunities to businesses. Additional capacity will translate into lower trucking costs, and I'd also look for fewer increases in fuel costs in the short term, which is good for just about everybody."
Bankruptcies will cause tighter credit terms
Brett Hatton is the founder and CEO of Four Hands, an Austin company that imports low-cost furniture from Asia. "I guess some would say that we are the enemy," he admits.
"One thing we anticipate in 2007 is a higher level of bankruptcy than in previous years among high profile retailers. Just recently, our second-biggest customer went under suddenly. It was a chain called Storehouse that had 71 locations across the country, $150 million in revenue, and $25 million in inventory--and it was ultimately sold to a liquidator for $17 million. That was a wake-up call to us that, in terms of credit and accounts receivable, we have to make sure that we are tight there. Right now, the average age of our accounts receivable is about 31 days, and it's holding steady. But we're watching that number closely."
Your mobile phone will be running your business
Dr. Irwin Mark Jacobs is the founder and chairman of Qualcomm (NASDAQ:QCOM), the $7.53 billion company based in San Diego.
"The whole communications area will continue to grow very rapidly, with the trend toward wireless continuing as the capabilities and the investment go up. There are now more than 2.5 billion mobile phone subscribers in the world, and the result is that there are very interesting businesses springing up to support them with software that can be downloaded. And wireless devices and phones are becoming more able to do core business functions. I can't imagine anyone traveling without e-mail wireless access anymore. Every city I go to, I don't bother connecting to a wired connection. As you see this technology developed for business users, you'll also see it adapted by programs that bring communication to the remote areas of the world for things such as education, medicine, and microfinance."
Vista and Office 2007: Microsoft's last hurrah?
Joel Spolsky is the founder and CEO of Fog Creek Software, a New York City-based maker of tools for software developers. He also hosts the popular Joel on Software blog.
"The big story in the software world--which will have implications for all sorts of companies--is going to be how well Microsoft (NASDAQ:MSFT) manages the transition to Vista and Office 2007. It seems like the last hurrah for the desktop software market as almost everything interesting is now happening on the Web. Obviously, things like Google's Web-based calendar, e-mail, word processing, and spreadsheets mark a huge shift in software. It's looking like Google (NASDAQ:GOOG) is doing to Microsoft what Microsoft did to Lotus and WordPerfect: changing the platform and then winning big on the new platform."