Why Does it Seem the World’s on Fire While Business is Going 90 MPH?
Our GABB Broker Member Gene Wright of Northstar Consulting offers his thoughts on the state of business in these unprecedented times:
“Why Does it Seem the World’s on Fire While Business is Going 90 MPH?”
We’re living in unprecedented times in a world no one could imagine only a few weeks ago. While the world has united in solidarity with Ukraine, one man holds us hostage with an all or nothing strategy he believes will bend the US to his will. I’m afraid things may become worse before getting better and the economic impact on small business owners in Georgia is real.
Locally we’re living through staggering inflation not seen in years. Commodity prices are at an all time high with seemly no relief in sight. Gas prices are above $4 a gallon and at the grocery store prices seem to increase every week. “Round and round and round we go, where it stops nobody knows.” It seems that good news about the retreat of COVID after two years of business disruption is hardly noticed.
I spoke with an owner of a large brokerage in Nebraska recently who represents sellers on a national level. She was very pleased with her company’s progress this year so far, having done over 80 business valuations since January. She’s seeing more seller and buyer interest than in 2019. She told me smart sellers are pricing goods and materials on a cost-plus basis, with many adding fuel surcharges for job travel in response to higher inflation to protect profits. Service businesses are still handicapped by the need for more workers, but seem hopeful that as COVID fades, more people will return to work. Supply chain interruptions are forcing small business owners to carry more inventory than ever but seem hopeful that conditions will improve in the second half of the year.
In our business, we’re seeing far more buyers than last year, and it seems there’s a shortage of good cash flowing businesses available for them to buy. SBA lenders are calling to ask what we have in the pipeline, and some are offering to do deals with 90% loan coverage for exceptionally qualified buyers. That means that buyers still have access to low interest rates (historically) and can receive better return on capital invested than many other investment options.
If you’re a small business owner thinking about selling, now is the time to learn more about selling your business before interest rates rise later in the year. Business is going 90 MPH while the world is on fire!