ATLANTA–A maturing business cycle, the ongoing global slowdown, and the U.S.-China trade spat are fostering a deteriorating business investment climate, and a slowdown in job growth has made consumers wary of spending, according to Rajeev Dhawan of the Economic Forecasting Center at Georgia State University’s Robinson College of Business.
“Investments are always a risky bet. And as the amount of uncertainty rises, investment spending is the first to suffer,” Dhawan wrote in his “Forecast of the Nation,” released today (Nov. 20, 2019).
The Global Economic Policy Uncertainty Index, at its highest level since 1997, has been extremely elevated for the past 18 months. Dhawan attributes the uncertainty in no small part to the imposition of tariffs by the world’s two largest trading partners, the U.S. and China, on each other’s exports.
“Although there are other trade skirmishes [between Japan and Korea, the ongoing Brexit saga, the Catalonia secession in Spain, and even the September missile attack on Saudi oil facilities] the U.S.-China trade spat takes center stage.”
The forecaster posits that as management of U.S.-based global companies consider moving factories out of China and undoing supply chains they spent decades establishing, “their primary focus is on the vexing issue of building new supply chains and not on expanding existing business capacity, i.e. hiring.”
The fallout is readily apparent in investment growth rates. Business investment declined 3.0 percent in the third quarter of 2019, after dropping 1.0 in the previous quarter, which was a dramatic contrast to the first half of 2018, when investment grew 8.4 percent following the Tax Cuts and Jobs Act of 2017. Two other factors, or shocks, contributed to weak investment – reduced fracking investment due to falling oil prices, and the impact of the March 2019 grounding of the Boeing 737 MAX on high tech manufacturing. Looking forward, the Institute for Supply Management Manufacturing Index is below 50, signaling future contraction in the industrial sector.
As for consumer confidence, a 10-point market drop since Aug. 2019 could signal a consumption growth slowdown. The last three Federal Reserve rate cuts should have boosted consumption by lowering interest rates for car loans and on new or refinanced mortgages. However, Oct. 2019 vehicle sales of 16.5 million units were much lower than the average 17.0 million units sold the previous three months.
Damage from the last few quarters of deficient investment growth will be evident in subpar GDP growth, less than 1.5 percent on average in the coming quarters. And Dhawan characterizes business investment equipment growth as “nonexistent” until Boeing’s woes end in mid-2020.
“As growth drops well below the 1.8 percent growth potential, the Fed will be forced to cut rates several times in early 2020, most likely during the March and June meetings of the Federal Open Market Committee,” Dhawan said.
Even with these cuts, Dhawan anticipates GDP growth to drop to 2.3 percent in 2019, then decline to 1.5 percent in 2020 and improve to 1.8 percent in 2021.
“The election will be over by 2021, hopefully, and no matter who is in the White House, businesses can plan again with somewhat more certainty than at present,” Dhawan said.
Highlights from the Economic Forecasting Center’s National Report
- Overall GDP growth will be 2.3 percent in 2019, 1.5 percent in 2020 and 1.8 percent in 2021.
- Investment growth will be 2.2 percent in 2019, 0.3 percent in 2020 and 2.5 percent in 2021. Monthly job gains will be 165,300 in 2019, drop to 90,600 in 2020 and rise to 94,700 in 2021.
- Housing starts will average 1.256 million in 2019, 1.215 million in 2020 and 1.220 million in 2021. Vehicle sales will average 16.9 million in 2019, 15.8 million in 2020 and 15.5 million in 2021.
- The 10-year bond rate will average 2.1 percent in 2019 and 2020, then rise to 2.7 percent in 2021.
The old saying, “an ounce of prevention is worth a pound of cure,” most definitely applies to any business owner that believes he or she will someday want to sell his or her business. The bottom line is that every business owner has to transition out of ownership at some point. In a recent Inc. article, “Four Mistakes That Could Lower Your Business’s Value and Weaken Its Salability,” author Bob House explores 4 mistakes that could spell trouble for business owners looking to sell.
No doubt House explores some excellent points in his article, such as that you should always have what he calls, “a selling mindset.” The reason this mindset is potentially invaluable for a business owner is that when operating in this way, sellers are essentially forced to stay on their toes.
Or as House writes, “a selling mindset encourages continual innovation, growth, and investment, helping your business stay ahead of the competition and at the top of its potential.” Having a “selling mindset” means that business owners have no choice but to perform periodic reality checks and access the strengths and weaknesses of their businesses.
Mistake #1 Poor Record Keeping
For House, poor record-keeping tops the list of big mistakes that business owners need to address. As House points out, both potential buyers and brokers will want to examine your books for the last few years. The odds are excellent that before anyone buys your business, they will look very closely at every aspect of your financials, ranging from your sales history to your operating costs.
Mistake #2 Failure to Innovate
The next potential mistake that business owners need to avoid is a failure to innovate. House notes that a lack of tech-savviness could make your business less attractive to prospective buyers. The simple fact is that virtually every business is now impacted in some way by its online presence, whether it is the quality of that presence or lack of it altogether.
For House, a failure to maintain an active online presence could be associated with a failure to innovate. Even if your company is innovative, if you do not maintain a coherent and robust online presence, this could portray your company in a negative light.
Mistake #3 Unstable Workforce
House also feels that having an unstable workforce could spell trouble for your business’s value and negatively impact its salability. Most prospective buyers will not be very eager to buy a business that they know has a lot of employee turnover. In general, new business owners crave stability. Attracting and keeping great employees could make all the difference when it comes time to sell your business.
Mistake #4 Delayed Investments
The final factor that House notes as a potential issue for those looking to sell their business is delaying investments and improvements. House states that it is important for owners to continue to invest even if they know they are going to sell. Investing in your business can help it expand, grow and showcase its potential future growth.
Another excellent way to prevent making mistakes that could interfere with your ability to sell your business is to begin working with a business broker. A top-notch broker knows what mistakes you should avoid. This experience will not only save you countless headaches but also help you preserve the value of your business.
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AUGUSTA, Ga. — Georgia’s business climate has been named No. 1 in the nation by Site Selection Magazine, an internationally circulated business publication covering corporate real estate and economic development, for the seventh year in a row. Georgia is the only state that has received the distinction seven consecutive times in the history of Site Selection’s rankings.
“I am incredibly proud that Georgia has received the No. 1 ranking from Site Selection for the seventh year in a row,” said Governor Brian Kemp, who made the historic announcement at the Georgia Cyber Center in Augusta, Georgia.
Site Selection releases its Top State Business Climate rankings each November. The rankings are 50 percent based on objective criteria and 50 percent on the input received from a survey of independent site location experts who are asked to rank and explain their choice.
“Our readers are keenly interested in our annual state business climate ranking, because they seek locations with the greatest prospects for success,” said Mark Arend, editor-in-chief of Site Selection. “Georgia’s seventh consecutive Top State Business Climate win reminds them that a Georgia location will contribute to their productivity and profitability long term.”
Governor Kemp said Georgia “will continue raising the bar and working with our economic development partners in the public and private sectors to ensure that Georgia stays the best place in the nation to live, work, and raise a family.”
“The nation’s leading site consultants see opportunity for growth across our state,” Kemp said. “Our top-ranked workforce development initiatives – combined with a conservative, pro-business policy approach, world-class higher education system, and a logistics network that puts the global economy within arm’s reach – make Georgia a top competitor for investment from businesses large and small – across the country and around the world.”
Georgia has long received recognition from leading companies and site consultants for its attractive business climate. The state’s workforce training program, Georgia Quick Start, is the top-ranked program in the United States. Logistics hubs like the Port of Savannah and Hartsfield-Jackson Atlanta International Airport connect businesses to their consumers far and wide, and the state’s pro-business policies make Georgia a competitive option for companies looking to locate or expand. In Fiscal Year 2019 alone, the Georgia Department of Economic Development supported the creation of nearly 29,000 new jobs through the location of 332 projects, 74 percent of which were located outside of metro Atlanta.
“We are thrilled that Georgia’s business climate has once again been named No. 1 by Site Selection,” said GDEcD Commissioner Pat Wilson. “Under Governor Kemp’s leadership, our partnership approach to economic development has enabled us to maintain a competitive edge in attracting new business and expanding our existing industries.
“Our world-class team at the Georgia Department of Economic Development is proud to work with our economic development partners throughout the state to make record-breaking achievements like this possible. We look forward to joining with Governor Kemp to continue spreading hope and creating opportunities for all Georgians in the years to come.”
Site Selection Magazine joins Area Development Magazine in naming Georgia the top state for business for 2019 – the seventh and sixth straight year, respectively, that both publications have awarded Georgia the ranking.Read More
If you’re hoping to borrow money to buy or start a business, you’ll probably need a business plan.
A business plan, which projects 3-5 years ahead, is your road map for your business. It outlines how a company plans to reach yearly milestones, including revenue projections. A well-thought-out plan also helps a business focus on its key elements and helps the owner make good decisions, according to the Small Business Administration.
Serial entrepreneur Alejandro Cremades, author of The Art of Startup Fundraising, says you “should have a plan in order to get yourself organized, to ensure you have some type of viable commercial potential, you have focus and hopefully aren’t going to run out of money or starve before you get going.”
The SBA’s Business Plan Tool is a free resource that guides you step-by-step to create the plan. Not only can you save your plan as a PDF file, you can also update it at any time, making this a living plan to which you can often refer. You can also use your completed business plan to discuss next steps with a mentor or counselor from an SBA resource partner such as SCORE, a Small Business Development Center (SBDC) or a Women’s Business Center (WBC).
All of your information entered into this tool can only be viewed by accessing your account using the password you have specified.
You can complete each section of SBA’s Business Plan Tool at your own pace, save your work at any time and pick up where you left off the next time you log into the tool. Your information will be saved for up to six months after your last login date.
Writing for Forbes, Cremades says that traditional business plans can be massive, expensive, time-consuming projects. If “you don’t plan to raise money, apply for loans and don’t intend on bringing in partners, then you certainly don’t need a 25lb manuscript. Keep it simple.” Brian Chesky, founder of Airbnb, is famous for his one-page business plan for global domination.
Harvard Business Review (HBR) says some business plans “end up nothing more than a fable.” That because HBR says “the real key to succeeding in business is being flexible and responsive to opportunities. Entrepreneurs often have to pivot their business once it becomes clear that their original customer is not the right customer, or when it turns out that their product or service fits better in an alternate market.”
HBR also wrote that:
- The “most successful entrepreneurs were those that wrote their business plan between 6-12 months after deciding to start a business. Stating that this “increased the probability of venture viability success by 8%.”
- Chances of success rose by 12% for those that spent no longer than three months on their plan. Spending more time than that was futile.
- Startups chances of venture viability rose by 27% if the plan was created at the same time that founders were talking to customers and preparing marketing.
According to Entrepreneur.com and Rule’s Book of Business Plans for Startups, founders should be considering these factors when creating their plan.
- How the business will be vested
- Main objectives
- Mission statement
- Keys to success
- Industry analysis
- Market analysis
- Competitor analysis
- Core strategies
- Marketing plans
- Organizational structure
- Key operations
- Projections and pro formas
- Break-even analysis
- Financial needs
SCORE, an SBA partner that provides free business mentoring and education, offers templates with instructions for each section of the business plan, followed by worksheets.
- Executive Summary
- Company Description
- Products and Services
- Marketing Plan
- Operational Plan
- Management & Organization
- Startup Expenses & Capitalization
- Financial Plan
For more help with getting business financing, consult one of the GABB’s professional SBA lenders who can advise you on what you need to get funding for your business.Read More