Economic Outlook and Elections, Start Succession Plan, AI in Manufacturing

Hey everybody, it's Gene Marks, and welcome back to this week's episode of the Paychex Thrive Week in Review. This is where we take a few items in the news that impacts both your small business and mine, and we talk about it a little bit.

Listen, before we get started, you know, we've all got lists and tasks and things that we want to cross off. It indicates we're getting things done, right? I have my own task list that I use to run my business. But what if I told you about a list you didn't have to cross anything off, but you'd still be accomplishing a lot? Well, the Paychex Year-end Checklist makes your payroll year-end prep so much more manageable. It includes key deadlines and dates, tax form guidance, compensation planning tools, and even steps to start 2027 out on the right foot.

I am giving it and recommending it to all of my clients and the people that I speak to. If you would like to access the Paychex Year-end Checklist, go to go.paychex.com forward slash Y-E checklist and you can check it out. We will put this link into the show notes for this episode, but it's go.paychex.com/yechecklist. All right, let's get to the news.

The first column was actually written by yours truly for The Guardian. It came out on Sunday. The title of the column is “Small Business Owners Are Doing Okay, But Will That Help the Republicans in the Election?” Well, as November's midterm elections approach, America's 34 million small businesses are demonstrating resilience despite economic uncertainty and dissatisfaction with the current administration's economic performance.

Recent surveys reveal relatively stable confidence, although inflation and labor shortages remain significant concerns. The U.S. Chamber of Commerce reported that 72% of small businesses are comfortable with their cash flow, while only 27% believe the national economy is healthy. Employment indicators are mixed. Paychex, in particular, is reporting small business hiring is resilient, which is great, but other levels of reporting sometimes contradict that depending on where you're getting the numbers from. QuickBooks says that their job losses among smaller employers have intensified. Who knows, right?

Meanwhile, business revenues are increasing. Manufacturing and service activity continues to expand. Consumer spending remains relatively strong. Philadelphia area businesses where I'm from, they're reflecting those national trends, but they face additional challenges involving business formation and operating costs. That is very indicative of cities around the country.

So, basically, you know, my conclusion is that the current party in power could benefit politically from this economic resilience, but you know, they do have low approval ratings, so we don't really know if that's going to undermine the elections in November.

Lots of stuff that's going on. Remember that small businesses represent 34 million votes. And it's not just the business owners, it's the people that they employ. People have different opinions. We're in a big country. There are a lot of businesses that are doing quite well, and some that are very challenged this year, as well. Will that all turn into a difference in the midterm elections? We are going to have to wait and see, but it should be an interesting thing.

Right now, the polls are negative for the GOP but that doesn't mean that that couldn't change between now and when the election actually occurs.

All right, next story comes from Yahoo Finance in a press release in PR newsletter about … PR Newswire, about funding of your future through small businesses. A national survey commissioned by X Factor, uh, Exit Factor, reveals that many small business owners depend heavily on their companies for their financial futures but lack adequate exit strategies.

Among 1,104 respondents, 57% reported being highly dependent on their businesses to fund their retirement or their next life stage, while 64% have at least half their personal net worth tied to their companies. Despite this dependence, 33% have taken no exit planning steps. Only 23% have formerly valued their business as a part of their exit preparation, and just 15% have written exit plans.

Owners cite competing daily responsibilities, emotional attachments, and perceptions that retirement remains distant as major obstacles. Nearly half say a health scare could accelerate their planning. Exit Factor President Peter Giese emphasizes the importance of determining business value, improving operational performance, and developing a succession options well before retirement. The findings highlight significant financial risks associated with inadequate preparation.

So, a few comments on you here. You've heard me say this before; more than half of the business owners in this country are over the age of 50. The average age is approaching 60 years old. If you're in that bucket, and it's likely that you are, you have to look at your succession, your exit from your business with a five-year plan. That's how you look out. It's not gonna happen tomorrow. You're not gonna get up and suddenly decide you're gonna sell your business and then the transaction just happens, and it's gonna take a little bit of time.

So, my smartest clients, the people that I talk to around the country, people that really know what they're doing with their businesses, they're thinking ahead. They are planning out their retirement, they're planning out their succession. You know that it's very risky to have all of your eggs in one basket. You know that if your entire business is based around one or two customers, that is really opening up to a lot of exposure.

Well, it's the same thing with your personal assets. If you're telling me that most of your personal assets, as almost 60% of people said in this survey, is your business, you know, it is putting a lot of pressure on your business to be able to fund your retirement.

So, one of the things that you want to do with a succession planning or an exit consultant or a good wealth manager or somebody that that deals with estate planning, as well, is you need to be figuring out ways to diversify your assets so you're not completely dependent on your business. Can you start exiting out of your business in smaller steps? A lot of my clients are doing that through the form of ESOPs or other partial sales. Can you move assets or cash out of your business and diversify them into other places: Treasury bills, the other markets, other real estate not associated with the business?

And finally, whatever you still have in your business that you know you're not gonna, you know you can't move away from, you gotta come up with a succession plan. How are you gonna build that value to its maximum and what is your plan for exiting out? Will you be selling it to some third party or some private equity firm? Will you be handing it down to your kids, selling it to your employees? There's a lot of options.

So, you want to be thinking about that now, building value now with a five-year plan. Clearly from the survey and many others, a lot of small business owners are not doing that, and that can't be you. It cannot be you.

All right, finally, in our AI news of the week, there was a great article on Manufacturing Dive about what manufacturing companies actually think about AI. You know, I'm obsessed about using AI practically in the real world. What about people that are in the manufacturing industry? What are they doing with AI?

Well, according to this article, manufacturing executives are increasingly recognizing artificial intelligence and automation as opportunities to improve their productivity, reduce downtime, and address workforce shortages. I think we're all realizing that, right?

However, many companies struggle to achieve measurable returns on their investments. Leaders from companies like Pella and Hexion and other organizations, these are big manufacturers, described AI applications involving predictive maintenance, troubleshooting, quality control, and transferring institutional knowledge from experienced workers to newer employees.

Pella, for example, is developing dedicated teams to identify practical applications and expand successful initiatives. Experts caution that manufacturers frequently adopt AI without identifying specific operational problems or establishing performance measurements. They recommend evaluating investments against metrics including production throughput, equipment downtime, waste reduction, labor utilization, safety, regulatory compliance, and unrelatable data or unreliable data that's creating significant risks, and particularly in sensitive manufacturing environments.

So, my takeaway from this article is that manufacturing industry does see how important AI is, but they're still trying to figure it out. So, let me give you some advice, okay? Number one, on the manufacturing side, talk to your manufacturing, accounting, or ERP vendors. There's a bunch of them that are out there. I don't know, Epicore, Sage, Microsoft Dynamics, SAP, you can name a bunch of them, Acumatica. Talk to them because they are developing AI features and more tools and technology to complement the products that you already own so you can lean into some of those AI tools to increase productivity.

Some good ideas are mentioned in this survey, like for example, reducing downtime of machines. Is there a low-hanging fruit AI application you could have written that actually looks at, monitors what's going on with a machine, senses any kind of vibrations, smells, heat, undue electricity, and then reports that back immediately to management who can then take proactive steps to make sure that the machine keeps running more smooth?

Or can you use AI, we talk about institutional knowledge. Do you have a ton of technical documents and manuals and other types of information lying around that you can connect Claude to and then open it up for not only your employees but your customers to access, so that people aren't calling and asking questions and spinning wheels? They can get not only immediate access, but as your AI platform like Claude, for example, learns and gets trained and gets smarter, can start offering advice and steps and tips to fix problems and address other kinds of challenges.

So, there are a lot of ways for you to be using AI in your business.

All right, my name is Gene Marks, and you have been watching or listening to this week's episode of the Paychex Thrive week in review. Remember a few things. First of all, your Paychex Year-end Checklist, okay? Go to go.paychex.com/yechecklist.

Follow this podcast on YouTube and on your favorite podcast platform so you can get the latest updates. And if you need some tips or advice or help in running your business, go to paychex.com/thrive and you can sign up for our Thrive Newsletter. You'll get back episodes of this podcast and some help in running your business even better.

Again, my name is Gene Marks. Thanks for joining. It's been great. We will see you next week with some more news that impacts your business and some thoughts on how that will work. Talk to you soon.

My name is Gene Marks, and you've been watching or listening to the Paychex Thrive Week in Review podcast. A few things to take away. First of all, if you are in need of HR or payroll help in your business, consider Paychex. Go to paychex.com/meetpaychex. That's P-A-Y-C-H-E-X.com forward slash M-E-E-T-P-A-Y-C-H-E-X. Please follow this podcast on your podcast platform or on YouTube if you are enjoying the content so you stay up to date on our latest episodes.

And if you need help or advice or tips in running your business, get our Paychex Thrive newsletter. Go to paychex.com/thrive and sign up for it there.

Hope you found this information helpful. I'll be back with you next week with more news that impacts your small business and mine. My name is Gene Marks. Thanks so much for watching or listening. Take care.

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