This is the first Friday of 2012 and as I work through my e-mails, I’m weighing this brand new year and what it will bring. I expect it to be much better for most business owners than 2011.
The American economy is showing signs of improvement, there is increasing demand for Canadian oil and gas, the potash industry in Saskatchewan is doing well and it would appear that the U.S. housing market has finally bottomed out.
Canadian banks have become more aggressive in the provision of Canada Small Business Loans, employment here is forecast to improve and small business owners are anticipating a better year in Canada.
At the same time, the economy in Europe is shaky and is probably in for a very tumultuous year.
Our current government in Canada has not provided any indication of support or programs that would have a positive effect on small business, but they have maintained low interest rates and a sound banking system. At the same time, we have many business owners past 65 and looking to retire, with many leading edge baby boomers in the same frame of mind.
I expect this to be an interesting and exciting year for small business owners.
With volatility comes opportunity for those who recognize it and are able to act quickly on the changes in the marketplace. For business owners who are considering selling their business this year or the next, now is the time to get focused on the value drivers that will increase the value of your business.
Whether it is increasing sales/profits, eliminating customer or supplier concentration issues, improving the systems that operate your business, or improving hiring and training practices, the time to focus on these factors is now.
Many of us make New Year's resolutions. Few keep them. If your New Year's resolutions did not include a goal for your business, make this goal now. Ensure that your goal is a SMART goal— Specific, Measurable, Achievable, Realistic and Time-Based.
If you are thinking of selling your business, focus your goals and resolutions on the value drivers for your business. Sunbelt can help you with the process of selling and while we will maximize the amount you receive, it will be related to how well you have addressed your value drivers.
Great time to buy a business
For those thinking of getting into business, there couldn't be a better time. We are at the beginning of a long uphill climb in small business.
Small business buyers generally fall into three categories:
- those who want to purchase a business in order to secure employment and build wealth and security for their family;
- those who want to purchase a business they can substantially improve and then resell;
- those who are seeking rapid expansion or synergies to increase margins and sales for companies they already own.
For individuals looking to purchase a business to provide their own job security and income, the beginning of an up cycle in the economy is a great time to buy. With many businesses underperforming, the cost to purchase is less than it will be two or three years from now. At the same time, you would be buying at the beginning of economic recovery so your odds of success are great. The success rate for Sunbelt clients who buy a business is greater than 98%, however buying at the beginning of a positive economic cycle results in greater success.
For those wanting to purchase a business that they can substantially improve then resell, there couldn’t be a better time to buy. There are currently many under-performing yet fixable businesses available for purchase. This strategy of buy, build and sell has made many entrepreneurs wealthy. Timing is an issue, though, so I would embark on this now.
Companies seeking rapid expansion or synergies are facing many opportunities. Private equity groups are looking for such investment prospects. Many business owners who are preparing to retire have businesses that are not performing at peak levels; these same businesses would provide the growth and synergies the purchasing companies are seeking. The result is that there are significant opportunities in the small end of the midmarket and capital is available to take advantage of these.
We are anticipating a raft of small Merger & Acquisition (M&A) transactions with financing coming from private equity investors. The very low interest rates and volatility in the stock markets are making M&A investments look far more attractive and in Canada, real estate is already priced at the high end based upon current ROI and forecast interest rates.
Putting all this together, 2012 should be an exciting year for both business sellers and business buyers.
At Sunbelt Canada, we are looking forward to the busiest year we have had in a decade and it's about time. The systems and people are in place. The training has been done. The marketing is at hand. We are ready. And we are pumped!
There will be wild ups and downs in 2012 that will create outstanding opportunities.
Hold on to your hats and enjoy the ride!