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Is your business ready for the next move?

Guest post by: Guy Rigby

Article Overview: The recession, from which we now appear to be emerging, has been unlike anything we've seen before. The drivers of the classic entrepreneurial business - easily available bank lending, steadily increasing sales, burgeoning M&A activity, a buoyant stock exchange and low taxes on exit - have all been severely undermined.

Is your business ready for the next move?

Are shell-shocked business owners now ready for action? The ravages of time and inevitability of major milestones like death, divorce or retirement suggest that as they return to profitability there will be a sizeable backlog of equity backed businesses waiting to do what they were either unwilling or unable to do over 2009 - raise capital to achieve growth ambitions, buy other companies or groom their business for exit.

It's hard though to see a return to the debt-fuelled hysteria of the unique boom that preceded this abnormally bad recession - pre-2008 metrics have gone out the window. More probable is a return to normality, where businesses once again have access to finance for growth or can get cash on exit but at more realistic valuations from funders and buyers.

The collective sigh of relief by the recession's survivors is tinged with a strong aversion to a repeat of previous excesses. The time of financial engineering as the primary method of creating returns, if not dead, is severely wounded. Instead, we expect more emphasis on the fundamentals of growing value in a business.

So what's changed? For individual businesses, some competitors may have vanished, as may suppliers. Some business relationships have been put under severe pressure and will be hard to mend. Battle-scarred businesses are likely to be more debt averse and the margin for debt capital will remain higher as banks seek greater returns.

And some of those foundations of UK entrepreneurialism which have driven business behaviour in the past - the mismatch of capital gains tax rates vs income tax rates to take just one example - have changed further, raising the possibility of more change and uncertainty in the future.

These are the new market realities and businesses need to be on their toes.

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Article Tags: business owners, entrepreneurial business, profitability, raise capital, recession



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