Top Concerns For Business Owners in 2014

January 2014      Download PDF      Print

In a recent Gallup poll, more than 600 owners of closely held businesses were asked about their companies' growth prospects for the next 12 months. Nearly 75% of those surveyed believe that the operating environment for their companies has either deteriorated or not improved over the past 12 months. While approximately 25% of owners are optimistic about the future, 28% are less optimistic going into 2014 than they were going into 2013.[1]

Those who are pessimistic about 2014 share many of the same concerns. In the article below, we examine some of the top issues troubling business owners as we enter 2014. We also discuss a major concern for owners who are nearing retirement.

Economic Uncertainty

Accelerated GDP growth, positive jobs reports, and improvements in the housing sector throughout 2013 have many experts anticipating a breakthrough year in 2014. Although forecasts for 2014 have generally been positive, many business owners remain skeptical.[2]

Since the recession, sluggish economic growth, political uncertainty, and increasing regulations have left many business owners hesitant to invest in growth opportunities or hire new employees. Additionally, the Federal Reserve plans to taper its quantitative easing program throughout 2014, which could drive interest rates up. Higher interest rates and a decline in hiring would have an adverse effect on consumer confidence and spending, stalling economic growth as a result.

Healthcare Reform

One of the most troubling issues for business owners in 2014 will be the changing cost of health insurance as a result of Obamacare. Exactly how severe the impact will be on businesses remains to be seen; however, the general consensus among employers is that premiums will rise and previously uninsured individuals will be prompted to enroll in their companies' plans, boosting the overall cost.

Political Uncertainty

Many owners were forced to delay growth plans and hiring in 2013 as Congress battled over tax increases, spending cuts, and the debt ceiling. Such uncertainty makes business owners hesitant to make long-term commitments, and unfortunately, there are signs that disagreements between lawmakers could continue in 2014.

Unresolved issues remain despite December's budget deal, and some fear another shutdown is possible if agreements are not reached by March. Issues that were left on the table in 2013, such as immigration reform and the federal minimum wage debate, could also have a significant impact on business owners' confidence levels.

Access to Capital

Credit conditions have improved over the past several years, but small business loans are still difficult to secure and volume remains far below pre-recessionary levels. Since the crisis, regulatory agencies have forced lenders to tighten borrowing requirements and cautious business owners have put off expansion, reducing the need for financing. Additionally, banks have increased their collateral requirements. At the same time, declining real estate prices have reduced the value of many potential borrowers' homes, which are often used as collateral. Though economic conditions may improve throughout 2014, it may be difficult for some companies to make a full recovery without access to financing.

Technology

Constant advancements in mobile technology, cloud computing, and marketing make it difficult for certain companies to remain competitive. It is becoming increasingly important to adapt to mobile, social, and online marketing trends as consumer behavior evolves, yet many companies lack the resources to invest in both new and traditional marketing strategies.

Some owners may also need to address privacy issues and find ways to improve data security. As the threat of cyberfraud grows, companies will need to invest in ways to protect their intellectual property. Many businesses already rely on cloud computing services to protect and store data and software off-site, but prices are climbing as more companies transition to the cloud.

Exit/Succession Planning for the Future

According to the U.S. Census Bureau's Survey of Business Owners, baby boomers make up approximately 25% of the U.S. population, yet they own nearly two-thirds of the country's 6 million privately held companies with employees. This means that over the next 10-15 years, close to 4 million business owners will approach retirement age.[3]

Because owners often have a majority of their personal wealth tied up in their businesses, many will have to sell their companies to produce the liquidity needed for retirement. This suggests that exit planning should be a top concern for many owners for the foreseeable future; however, it seems that most business owners are delaying the inevitable.

According to some studies, nearly 75% of business owners lack a formal succession plan, as they become so distracted by their daily responsibilities that they fail to plan.[4] Others delay exit planning because it evokes stress and negative emotions. Regardless, failing to plan could jeopardize the financial well-being of a business owner's family and employees, as well as the longevity of his company. In a previous article, we explained the importance of preparation and timing when it comes to selling a company. While business owners have little control over economic conditions, politics, and industry trends, they can control how much thought they put into their succession plans.

[1] http://www.gallup.com/poll/166658/small-business-owners-mixed-expectations-2014.aspx
[2] http://www.foxbusiness.com/economy-policy/2014/01/09/us-economic-growth-outlook-brightens
[3] http://www.axial.net/blog/baby-boomers-deal-flow/
[4] Mass Mutual Financial Group; "Business Owner Perspectives: 2011 Insights in an Uncertain Economy"

Contact Us

  • If you have any questions about selling your company in 2014, please contact:

    David Holzman, CFA
    President
    david@alliedbizgroup.com