Small businesses may have a happier New Year
We won’t know with any certainty for another 364 days, but there are indications that 2012 may be a better year for small businesses.
At least that’s the cautious opinion of three observers I asked about the 2012 outlook in sectors they follow: Manufacturing, once the poster child of an economy gone wrong; the business buy-sell marketplace; and the broader business scene.
Ÿ Manufacturing. “It’s been a long time coming,” says Paul Heinze, but he sees a “significant confidence” in the sector. “It’s more than wishful thinking.”
Heinze is president of Paul M. Heinze Co., a Barrington Hills consultant for manufacturers and other closely held businesses. There are two reasons for his optimism.
First, “There’s more production returning from China,” Heinze says. That’s a balance sheet issue. “The cost of doing business in China has gone up tremendously,” Heinze reports. Second, “there appears to be a trend for much more technical training in the trades.”
That’s really interesting: Manufacturing may be coming on as a place to work. “Jobs in banking (and similar industries) are no longer so prestigious to young people,” Heinze says. As a result, the training Heinze sees is “not just production jobs but training for skilled craftsmen.”
Ÿ Buying and selling. Businesses are starting to sell again. “People are getting more confident,” says Michael R. Liss, business and franchise attorney at Franlaw: Liss & Lamar, P.C., Oak Brook.
“Service businesses are hot,” partly because service businesses have “less need for financing,” Liss says. Financing generally remains an issue, with “seller financing a built-in source for every buyer,” he says.
Much of the rest of the financing is coming from self-directed IRA plans. “Buyers aren’t closing out their IRAs,” Liss says. “They’ve sold IBM and other blue chips and are investing in ‘Michael Inc.,’” Liss says. “They don’t have home equity, and banks don’t want to be bankers.”
Franchises, which account for 80 percent of Liss’ business, are popular with buyers for the name recognition franchises have with customers. Buyers tend to favor existing franchises which have a balance sheet history.
Ÿ The broader scene. Although Gary J. Teuber, Sr., a principal at Abacus Business Leaders LLC, a Deerfield consultancy, warns that concerns about European finances and our “dysfunctional federal government” are potentially limiting factors, he notes that “things are slowly improving.”
Business owners may not be able to do much about the external environment, Teuber says, “but internally they can do a lot.”
For example, Teuber says companies are beginning to ask more strategic questions. “Why are we selling this product?” is a question that today is coming less from a purely cost-cutting concern and more from an attempt to determine whether the product, or service, fits into the business’ needs, Teuber explains.
Ÿ Jim Kendall welcomes comments at JKendall@121MarketingResources.com.
© 2012 121 Marketing Resources Inc.