The Georgia Association of Business Brokers held its March 31 meeting online with more than 60 participants.
Business coach Russ Hall, our guest speaker, came to us using the Zoom virtual meeting platform. Mr. Hall offered advice on how small business owners can weather the current economic and health crisis. GABB affiliate and attorney Wendy Kraby talked about how loan closings are happening online, and SBA lenders discussed SBA loans available during the crisis and loan extension options.
The presentation from Russ’s excellent webinar, Crisis Averted,: 11 Steps To Help Your Business Survive and Thrive, is linked here: CRISIS AVERTED Webinar by Russ Hall for GABB
Since 2003, Mr. Hall has been a part of ActionCOACH, a global organization that helps the owners and teams of small businesses improve performance so that they can improve their lives. He spent his first seven years after university as a US Naval Aviator, and he piloted SH-3 Sea King anti-submarine warfare helicopters. He also spent 21 years with a Fortune 100 company in the Healthcare Technology sector, leading and managing national award-winning teams in Sales and Customer Service for most of that time. As a part of his development as a coach, he earned a Master’s in Industrial-Organizational Psychology from the University of Georgia.
Joining a Zoom Meeting
How do I join a Zoom meeting?
You can join a meeting by clicking the meeting link or going to join.zoom.us and entering in the meeting ID.
How do I join computer/device audio?
On most devices, you can join computer/device audio by clicking Join Audio, Join with Computer Audio, or Audio to access the audio settings.
Can I Use Bluetooth Headset?
Yes, as long as the Bluetooth device is compatible with the computer or mobile device that you are using.
Do I have to have a webcam to join on Zoom?
While you are not required to have a webcam to join a Zoom Meeting or Webinar, you will not be able to transmit video of yourself. You will continue to be able to listen and speak during the meeting, share your screen, and view the webcam video of other participants.
Thinking about whether or not you are ready to sell your business is an important question. It’s something that every business owner will have to address at some point. Importantly, there are far too many pieces in this particular puzzle to wait until the last minute to prepare an exit plan. You’ll want to begin the process sooner by asking yourself some key questions.
First, you’ll need to determine the actual value of your business. It is a harsh truth, but the market may think your business is worth less than what you think it’s worth.
This is where it pays to work with a business broker or M&A advisor early in the process. An experienced broker knows how to determine a price that will generate interest from buyers and seem fair. Yes, it will be the marketplace that determines the value of your business, but working with a seasoned professional is an excellent way to match your offering price with what the market will ultimately bear.
Second, you’ll want to consider whether or not you truly want to sell. Many business owners begin the process of selling their business only to realize a few hard facts. Upon placing your business on the market for sale, you may learn that you’re not emotionally or financially ready. Wanting to sell and the time being right to sell are often two different things. If this happens to you, consider it a learning experience that will serve you well down the line.
Get Your Ducks in a Row
After you’ve done a financial assessment, a little soul searching and have begun working with a professional, and have determined that this is a good time to sell, there are several steps you’ll need to take. You can be sure that any serious prospective buyer will want a good deal of information regarding your company.
Topping the list of items potential buyers will want to see are three years of profit and loss statements as well as federal income tax returns for the business. Other important documents you’ll need to provide are lease and lease-related documents, lists of loans against the business and a copy of a franchise agreement, when applicable. You should also have a list of fixtures and equipment, copies of equipment leases, lists of fixtures and equipment, and an approximate amount of inventory on hand. Failing to have this information organized and ready to present at a moment’s notice could be a costly mistake.
Working with professionals, such as accountants, lawyers, and brokers, is a savvy move. Owning and operating a business can be a complex process, and the same holds true for selling a business. Investing the time to seek out experienced and professional advice is the first step in selling your business.
ATLANTA–Having the Federal Reserve on hold for the foreseeable future, bipartisan agreement on fiscal spending and the signed phase one tariff deal with China have reduced the uncertainty that typically bedevil growth prospects, according to Rajeev Dhawan of the Economic Forecasting Center at Georgia State University’s Robinson College of Business.
“The seeds for 2020 growth were sown last year,” Dhawan wrote in his “Forecast of the Nation,” released Feb. 26, 2020. “In early 2019, business investment was already waning (after the boost from the Dec. 2017 tax reforms) when it hit a few potholes.”
Those potholes were the shocks of a sharp drop in oil prices and the grounding of Boeing’s 737 MAX, causing a contraction in business spending by late 2019.
“The die was cast for a growth slowdown in 2020,” Dhawan said.
The typical economic pullback experienced during a presidential election year began earlier than usual this cycle when election rhetoric heated up ahead of when expected.
Dhawan posits that subpar GDP growth (1.6 percent) in the first half of 2020 will be followed by a ramped-up GDP of 2.0 percent in the year’s second half due to a “positive exigent circumstance” when the 737 MAX returns to the skies in mid-to-late summer – tempering the impact of the ongoing presidential cycle slowdown.
Potential curveballs could beset Dhawan’s baseline forecast, the most obvious being a delayed return of the 737 MAX.
The forecaster is more concerned about what he described as “irksome geopolitical concerns” – e.g., Middle East flare-ups affecting oil production and capacity, kinks in the trade deal with China, post-Brexit uncertainty in EU-UK relations, action on past threats about German auto exports, and COVID-19, the coronavirus that first appeared in late 2019 in Hubei province, China, which Dhawan said is “the biggest threat to the 2020 forecast.
“At present, the key issue for us the incidence of spread of the virus outside China, and the Chinese have taken steps to limit it,” Dhawan said. “But, unlike a finite event, such as a hurricane or earthquake, the coronavirus is still playing out, making it hard to assess economic impact.”
The biggest economic problem now, according to Dhawan, is that factory workers are stuck at home after the Chinese New Year holiday.
“China is a vital part of the world’s supply chain for goods ranging from toys to iPhones. For an economic impact to happen, this disruption would need to last awhile, say until mid-April. When inventories run out, what will Amazon sell here? What will Apple and Samsung do?” Dhawan asked. “This is what I worry about the most.”
Highlights from the Economic Forecasting Center’s National Report
- Overall GDP growth will be 1.8 percent in 2020, 2.0 percent in 2021 and 1.7 percent in 2022.
- Investment growth will be only 0.6 percent in 2020, 4.3 percent in 2021 and 3.6 percent in 2022. Monthly job gains will be 143,000 in 2020, drop to 104,200 in 2021 and a similar 94,400 in 2022.
- Housing starts will average 1.258 million in 2020, 1.224 million in 2021 and 1.234 million in 2022. Vehicle sales will average 16.3 million in 2020, and 16.0 million in 2021 and 2022.
- The 10-year bond rate will average 1.9 percent in 2020, 2.7 percent in 2021 and 3.0 percent in 2022.
ATLANTA–Georgia’s maturing business cycle and weakening job quality mean economic and geopolitical developments will have greater impact than when the growth path was accelerating between 2013 and 2017, according to Rajeev Dhawan of the Economic Forecasting Center at Georgia State University’s Robinson College of Business.
“The two most important drags to growth are, mercifully, out of the picture in 2020. No tightening is expected by the Federal Reserve and there is a bipartisan agreement on federal spending. Additionally, the threat of ever-increasing tariffs on Chinese imports is off the table with the phase one deal signed last month,” Dhawan wrote in his “Forecast of Georgia and Atlanta,” released Feb. 26, 2020. “But Georgia’s catalyst sectors (manufacturing, technology and large firms with global operations) face other headwinds, namely global economic malaise and geopolitical developments.”
Dhawan characterized the quality of the 70,000 jobs Georgia added last year as “a bit of a disappointment. More jobs mean more paychecks, which fuel spending, resulting in the collection of sales tax at the cash register. But the purchasing power of these new jobs was weak. Georgia’s net sales tax collection growth of 2.7 percent in 2019 was woefully lower than the 5.6 percent growth in 2018.”
This happened even as the state added 46,500 jobs in the last six months of 2019. Looking at job additions by sector, 60 percent of those jobs were in just two sectors, hospitality and healthcare, accounting for about 25 percent of the employment base. These two sectors typically pay less than the high wages of the catalyst sectors. From 2014 to 2018, when growth was balanced, hospitality and healthcare accounted for 30 percent of job growth, closer to their share of the employment base.
“The seeds of future growth are not sown in these two service sectors,” wrote Dhawan. “Growth always begins in the catalyst sectors, especially those producing high paying jobs and creating demand for downstream services in these sectors.”
One catalyst sector, manufacturing, is dealing with trade headwinds and a weakened global economy, especially stagnation in Europe – a big buyer of Georgia machinery and industrial goods. As a result, the sector has gone from 8,400 job gains in 2018 to only 1,000 in 2019. A bright area in manufacturing is announcements that small manufacturing firms are hiring or setting up new plants.
“This shows that small manufacturing concerns that deal primarily with national demand are willing to risk expansion. Gainesville, which has a big cluster of these types of firms, grew 4.1 percent in 2019,” Dhawan wrote.
The forecaster is concerned about potential geopolitical developments – Middle East flare-ups causing oil price spikes, kinks in the trade deal with China, acting on past threats of tariffs on European auto imports, and COVID-19, the coronavirus that first appeared in late 2019 in Hubei province, China, which Dhawan said is the biggest “threat to the 2020 forecast.
“At present, the key issue for us is the spread of the virus outside China,” Dhawan said. “But, unlike a finite event, such as a hurricane or earthquake, the coronavirus is still playing out, making it hard to assess the economic impact from stoppage of Chinese factory production.”
“China is a vital part of the world’s supply chain for goods ranging from toys to iPhones. For these goods to be delivered to customers they first must arrive at our ports. Less production in China means less cargo arriving at U.S. ports, and subsequently less trucking and warehousing demand. This is a potential threat that one of our main engines of growth, the Port of Savannah, faces if the virus induced shutdown in China lasts until mid-April”.
Highlights from the Economic Forecasting Center’s Report for Georgia and Atlanta
- Georgia will add 54,400 jobs (9,800 premium jobs) in 2020, gain 47,400 jobs (8,700 premium) in 2021 and increase by 43,300 (7,900 premium) in 2022.
- Nominal personal income will grow 4.5 percent in 2020, 4.8 percent in 2021 and 4.7 percent in 2022.
- Atlanta will add 41,700 jobs (8,300 premium positions) in 2020, moderate to 34,400 jobs (7,000 premium) in 2021 and 28,500 jobs (5,900 premium) in 2022.
- Atlanta housing permitting activity will fall 6.1 percent in 2020, decline 2.6 percent in 2021 and fall another 0.9 percent in 2022.
Business acquisitions are red hot, and all kinds of businesses are being snapped up. Some people are under the impression that only large businesses are being acquired, but this is far from the reality of the situation. It would surprise many to learn that so much of the “action” is, in fact, small businesses buying other small businesses.
In his Forbes article, “Take Advantage of the Golden Age of Business Acquisitions,” author Christopher Hurn explores the true state of the “acquisitions game.” His conclusions are quite interesting. In Hurn’s opinion, there has never been a more active time in the realm of business acquisitions.
If you own a business and are looking to grow, then you may want to consider acquiring a competitor in order to consolidate the market. As Hurn points out, there are many reasons that you might want to consider acquiring a business in addition to consolidating the market. These reasons include acquiring a new product or service, acquiring a competitor that has superior technology or even identifying a business that you believe is primed for substantial growth.
Yet, there are other forces at work that are combining to make this moment the “golden age of acquisitions.” At the top of the list of why now is a good time to investigate acquiring a business is demographics. According to a 2019 study by Guidant Financial and Lending Club, a whopping 57% of small business owners are over the age of 50. The California Association of Business Brokers has concluded that over the next 20 years about $10 trillion worth of assets will change hands. A mind-blowing 12 million businesses could come under new ownership in just the next two decades! As Hurn phrased it, “The stars are aligning for the Golden Age of business acquisitions.”
This all points to the fact that now is the time to begin understanding what kind of acquisition would best help your business grow. Hurn believes that turning to the Small Business Administration in this climate of rapid acquisition is a savvy move.
In particular, he points to the 7(a) program and a host of reasons that the SBA can benefit small businesses. Since the SBA lowered equity injection requirements, it is now possible to finance a staggering 90% of business acquisition deals with loan terms up to 25 years and lower monthly payments. Additionally, the SBA 7(a) program can be used for a variety of purposes ranging from expanding or purchasing an existing business to refinancing existing business debt.
Hurn truly does have an important insight. Baby Boomers will retire by the millions, and most of them will be looking to sell their businesses. With 12 million businesses scheduled to change hands in just the next 20 years, now is a highly unique time not only in the history of acquisitions but also in the history of business.
Business brokers understand what is involved in working with the SBA and acquisitions. A seasoned business broker can point you towards opportunities that you may have never realized existed.