I like a bit of certainty; to know where I stand, but unfortunately, I think we can be pretty confident that 2019 is going to be a year of uncertainty. Regardless of whether we stay or leave in whatever form that looks like.
Many economists think that a slowdown is on the cards for 2019. As I write this article (7 February 2019), the Bank of England has slashed its growth forecast to 1.2%, down from 1.7%: the worst since 2009. This assumes a smooth transition agreement with the EU; so worse if disorder prevails.
Whilst the country has been absorbed in political matters, over the last three years we have seen a lot of inward investment into the UK: naturally so most recently, given what has happened with exchange rates and UK companies having become a lot cheaper to acquire.
Notably though UK buy-outs were down by about a third in 2018 and US confidence fell again at the end of last year. In January we have had the longest US government shutdown in history, and troubles with China continue, be they Huawei or tariffs related.
In Europe, the German economy is cooling, and the Italian one looks far from pretty. In France mesdames et messieurs have been busy in Yellow Vests getting tax cuts and increases in spending.
So, in uncertain times, what do you do with your business in 2019 - continue or exit: In blackjack terms, do you stick or twist?
I guess it depends on who you are. If you are in your 30’s, 40’s or 50’s and business is good then press on with sensible business practices, don’t overtrade, keep a close eye on working capital, and focus on earning good profits that generate strong cash inflow.
With earning good profits in mind, in January we held a seminar on profitable business generation. We covered different ways to grow your business, a hierarchy of profit improvement and drivers of profitability. If you missed it and would like to see it please let us know and we will happily deliver it to you and your management team.
Later in the year we will be doing a version just for professional firms - more details to follow, in a later blog and in our newsletters.
But, if are you not in your 30’s, 40’s or 50’s and are closer to retirement what then? If you are or considering a sale or passing the business on to management or the next generation the decision is perhaps harder than it was 6 months ago.
Good businesses will always sell in both times good and bad. Prices are not quite hitting the levels that they were in late 2017 / early 2018, but they are still good. Speaking with a corporate finance colleague earlier this week, he spoke very positively about the number of instructions he has at the moment, but his confidence of a sale is not what it was at the peak of the bull market.
If we do have a downturn though, how long will it be before we are back to the peak of the market? Probably 5/6/7 years? If you are currently in your 60's and own a business, you might feel that is a long time to wait.
So back to the title of this blog - What to do?
Following our seminar on profit improvement we have, company directors who have asked us to work with them over the next 12 and 24 months to help them work to improve their profits. We know that we can, and have staked part of our fees, making them part-contingent on the size of the profits that we help them achieve.
We have others with good companies that we are currently marketing for sale. They are companies with proven sustainable growth and we are confident that we can still help them to sell.
Other have looked to their management teams, and we are helping them deal with their succession plans through Management Buy Outs (MBO's).
And other clients are acquisitive: carefully evaluating deals to buy in, at the right time.
What to do in 2019? It seems that the jury is out.