Three Business Trends to Watch in 2019
January is always a busy time, both for businesses and individuals. Businesses are wrapping up their year-end and kicking off the new one. Hopefully you’ve enjoyed a short break, holiday time with family, or perhaps a warm-weather vacation and are refreshed and ready to dive into a new project. Even when you’re ready to start fresh on another year, there’s anticipation for what’s to come. What events will define 2019 for you, for your business, or for the world? Certainly there are a number of trends that could impact those decisions. So, without further ado, here are three trends I see for 2019.
1. Mergers and acquisitions will be strong as Baby Boomers continue to retire.
For businesses looking to grow by expanding a business line or offering complementary products, mergers and acquisitions (M&A) are an attractive option. Roughly 10,000 Baby Boomers turn 65 each day, and a recent survey by SunTrust found that 33 percent of Baby Boomer business owners expect to transition the ownership of their business in the next five years. For some, that’s selling to a family member, transitioning to an employee stock ownership plan (ESOP), or selling to a friendly competitor. With these stats in play, plus the strong market conditions we’re in, I think we’ll see even more businesses being sold in 2019.
For business owners – One of the best ways to grow your business quickly is to be open to buying others. However, this takes thoughtful consideration. For businesses new to acquisitions you can lean on your business accountant and commercial banker for advice; they have likely been a party to many of these transactions and can help you sort through the historical performance of the company as well as project future cash flow potential with the new ownership in place. You’ll also want to equip yourself with an experienced M&A attorney, the dollars spent here getting thorough agreements in place, will be worth protecting your investment post-acquisition.
2. Businesses will adapt to 2018 market changes and tariffs.
Businesses in all sorts of industries have started to feel the effects of 2018’s tariff activities. Particularly in the manufacturing or ag economies, this is manifesting as increased costs of goods and driving product costs up. There’s uncertainty – and to some degree, fear – about how long this will last and what’s coming next. We’re just at the tip of the iceberg in a sense, not yet knowing how other countries will retaliate to the U.S. I think we’ll see businesses adapting in how they manage their cash flow, working capital needs and, ultimately, how they adjust prices and renegotiate contracts with their customers.
For business owners – This is where heightened awareness and understanding of how this impacts your financial statements will be crucial. Only you know the margin compression your business can tolerate and when it makes sense to potentially make changes to the components of your top line revenue. Price changes are always sensitive discussions with customers so the flip slide may be assessing what alternatives you have with domestic suppliers. Inevitably you have to decide what changes are needed to protect your bottom line in the coming year.
3. Businesses will start building their own pipeline of talent.
The No. 1 thing I hear from my clients is the shortage of skilled labor and how hard it is to find qualified workers. While this comes as no surprise to many of you, the trend I foresee for 2019 and the coming years is that companies will start solving this problem by investing more thought, time and resources in their own talent pipeline. Whether that’s through greater partnerships and focused initiatives with local colleges and universities or developing programs for current employees to gain additional training or skills, businesses will play a more active role in recruiting (and retaining) skilled workers across all areas of their organization, from the factory floor to the C-suite.
For business owners – Recruiting top talent comes with challenges, particularly if your business doesn’t have the resources to compete with larger employers. Organizations and programs such as Elevate Iowa, ISU’s Center for Industrial Research and Service (CIRAS), Iowa Workforce Development and DMACC Business Resources (DBR) have resources to help you find and train workers.
While I narrowed my list of trends down to three, there are a number of others I’ll keep my eye on as the year progresses. A couple that nearly made the list include security, and how organizations safeguard both sensitive customer information and proprietary processes, as well as how businesses manage liquidity through various savings and investment options.
What trends do you expect to see this year, and how is your organization responding to the few I’ve mentioned above?
Three next steps