Strategic Planning: Look Ahead

What to expect in 2011 and beyond.
By Harry Dennis for BizTimes Milwaukee

His name is Mark Parrott, and he’s a business and personal financial planner and gifted TEC/Vistage speaker from Long Island, N.Y.

He spoke to my own TEC group recently and left us with much food for thought about what to expect in 2011 and beyond. I’m going to paraphrase the highlights.

The bottom line: If we want to succeed, we can’t sit on the sidelines. Success won’t come to us. We have to go after it. Here are tips for understanding what “it” is.

The spending mix

One-third of our country’s consumptive wealth is generated by the government, but two-thirds is generated by consumer spending. Consumer spending maxes out at around age 49. After that, it declines rather precipitously.

The number of people reaching that age, and even age 65, will be growing for the next 10 years or so. The baby boom is history. The traditional sources of consumer spending, the largest spending segment in our economy, is declining, with no end in sight.

Higher taxes likely will continue to erode this spending base. By the way, which of these age groups – 30, 50, or 60 – spends the most produces the most, earns the most, and invests the most? According to the Bureau of Labor Statistics, the answer is 50, with a mean around age 49.

The population mix

The U.S. birth rate, excluding births from illegal immigrants, has now fallen perilously close to where it will be difficult for the American population as we know it to grow as it has in the past to solve the economic needs of future generations. This has been true in Europe for some time, and Japan too. 

It’s not just growth, however. Look at China and India. It’s the quality of that growth – the ability of future generations to be productive and, therefore, consumptive economically. For quality growth, also look at Brazil.

Why is this important to know? Namely, it means that our historically tried and tested consumptive base – the 49 year olds – won’t be around to help us out much 50 years from now. Again, a notable exception in the U.S. is the Hispanic population, which is growing, and which is contributing to our consumptive economic base.

Taxation

What do you think? Should we expect higher or lower top federal income tax rates in the future? What are the implications?

You might be surprised to know that since 1913, top income tax rates have ranged from about 10 to a high of 90 percent during World War II. Today, they’re at around 39 percent.

Unless the economy double dips into another recession, in all probability, tax rates will be increasing again. The impact? A dampening effect on consumption, the bellweather of our economy.

Similarly, the inheritance tax is likely to bounce back to at least 50 percent. This, too, will indirectly affect spending attitudes and behavior.

Add to this liquidity issues at the state level. In Wisconsin, our budget crisis has reached epidemic levels. Regardless of promised spending cuts in Madison, inevitable tax hikes are bound to occur.

Responding to the mega-trends

As business people, especially entrepreneurs, we can capitalize on the mega-trends that seem to be working against us. To do so, we must be willing to anticipate the changes that are coming and adjust our business game plans to our advantage.

I invite you to use your imagination and the knowledge of your business to charter a direction in 2011 that will benefit you and your investments.

Products/services for an aging population

1. Low-cost home health and alternative care products.
2. Vacation alternatives.
3. Low-cost entertainment venues.
4. Devices that help those with disabilities.
5. Home delivery services.
6. Low-cost long-term care.
7. Short-term investment alternatives.
8. Retirement planning or death planning services.

Products/services in “other” categories

1. B-to-B relationships in economically stable and net positive population growth countries.
2. Hispanic food products.
3. Low-cost housing materials and content products.
4. Language translation media.
5. Child care assistance.
6. Minority worker placement services.
7. Tax-advantaged/deferral investment programs.
8. Alternative energy/green products & services.

How many more can you name, given our mega-trend demographic and tax climate directions? The consumer will remain king, unless our country falls into anarchy or some other unacceptable non-democratic alternative. But that’s unlikely.

One of the characteristics that makes us unique in the United States is that we have a solid history of overcoming presumptive impossible challenges. Our ingenuity and creativity have never failed us.

In spite of these mega-trends, I see nothing imminent to alter our ability to overcome any challenge put before us. Until next month, let your imagination start working in your business today for tomorrow.