April 29, 2016
Business is booming. Just ask family-owned enterprises. According to “Big Four” auditor PricewaterhouseCoopers, 70 percent of family firms have experienced revenue growth in the past year, and 51 percent are “very confident” that they’ll continue growing revenue in the next five years. That’s a major shift from just six years ago, when less than half of family-owned firms grew sales. And as recently as 2012, only 39 percent were optimistic about future growth.
“We’re in a very, very strong environment,” says Dominic Trader, Co-Head of The Private Client Reserve’s Business Owner Advisory Services. “It’s not unusual these days for us to have a conversation with the owner of a privately held business who says business is as good as it’s ever been.”
Indeed, many companies have transitioned from licking wounds to building muscle.
“For the first couple of years after the downturn, if you were over-leveraged as a business, you were trying to figure out how to salvage yourself and keep the business afloat; if you weren’t, you were trying to figure out how to optimize your cost structure to take costs out of the business,” Trader says. “Today, that feels like a conversation of the distant past. Instead, businesses are now asking themselves: How do I take advantage of this robust business environment?”
Business owners historically have answered that question in one of three ways:
- I can GROW my business by increasing my size
- I can EXPAND my business by increasing my scope
- I can SELL my business and get out while the getting is good
Although each of these scenarios might have different possible rewards and potential pitfalls, they have at least one thing in common. Each has significant financial implications that business owners should document in a meticulous business plan and share with financial backers assessing their prospects and plans.