New Year’s outlook promising for small businesses
By Jim Kendall
This column originally appeared in the January 5, 2015 Daily Herald
We still have 51-plus weeks to go, but 2015 looks promising – especially in sectors where the cost of money can be a thorny issue:
* Last year’s first six months were slow in the remodeling industry where design-and-build architect Michael Menn holds forth, but the second six months were “outstanding,” Menn says.
Menn, principal of Michael Menn Ltd., Northbrook, expects 2014’s strong finish to extend through this year. “I’m busy and I expect to stay that way,” he says. “My peers are the same way.”
* This could be the year to sell your business. “The environment is right,” says Eric Dunn, managing director, Focus Capital Advisors Inc., a Downers Grove-based mergers and acquisitions facilitator.
Dunn’s environment includes favorable interest rates.
* Manufacturing may be stronger than it has been in years, which means, says Paul Heinze, “The demand for privately owned Midwestern manufacturers is very high. Money remains affordable, and there are no major storm clouds on the horizon.”
Heinze is a veteran industry advisor and president, Paul M. Heinze Co., Barrington Hills.
The availability and cost of money impacts virtually every business, but the industries heard from here have been particularly vulnerable. The positive vibes, partly a result of the Federal Reserve’s apparent reluctance to raise interest rates, are nice.
“The middle class has gone through some bad times,” says Menn, “but now homeowners have some equity and they’re willing to spend to stay in their homes.”
Some homeowners, in fact, are self-financing home remodeling projects, Menn says. “They saved in the hard times and maybe have a quarter of a million dollars in the bank. With appraisals (on home purchases) coming in low,” Menn says, homeowners potentially moving up must come up with additional cash. Instead, many households are choosing to spend to remodel their current homes.
Heinze sees some “restricting factors” in manufacturing, where many owners are reaching an age when a sale of the business typically comes to the fore. But, Heinze says, “Owners are looking longer term.
“Most people believe they will live longer, and they’re worried about outliving their money.” Consequently, Heinze continues, owners who might otherwise be selling “are sitting on their businesses. Owners are concerned about getting value for their businesses.
”Seventy-five has become the new 65.”
Dunn sees “lots more opportunity (for small business sellers.) There’s more capital in the market than good places to put it.”
Part of the reason is the existence of “more small investment firms, private equity, than there used to be,” Dunn says.
Strategic buyers, those looking to build market share with a targeted purchase, also are “very active,” Dunn continues. “We have unbelievably low interest rates right now. People think rates may rise a little later this year, (but) there’s a bit of a window” now.
“We all live through cycles,” Dunn says. “This is a pretty good time” to sell.