It’s debated whether the old Chinese proverb, “May you live in interesting times” was viewed as a blessing or a curse. Given the current pre-election state of the economy, small business owners can sympathize.
Times are not only interesting, but also confusing as many business owners struggle with their end-of-the-year planning activities, as well as their 2013 strategies. This is the time of year when planning between small business executives and their accountants are in full swing. This year, not so much. Or more accurately, not so soon as many decisions will need to wait until after November’s presidential election. President Obama and Republican candidate Mitt Romney are sharply divided on key economic policies affecting businesses of all sizes, including the fate of the Bush era tax cuts. A Romney victory would likely see these cuts extended unilaterally, while President Obama has said he’d like to tax cuts extended only to households earning under $250,000 a year.
If that’s not confounding enough, we’ve seen significant activity in private equity investments in small and mid-sized businesses in the last few months. After sitting on the sidelines for the better part of three years, private equity has accelerated its closing of M&A transactions to take advantage of anxious sellers, roll-ups, a stabilized (although not expanding rapidly) economy, a steady stock market, and companies that have turned the corner with consistent, positive EBITDA and which are trending up. In a sense, many business owners feel like their businesses are in a strong enough financial position to be sold and private equity is looking at these “survivors” and judging them worthy of acquisition.
The questions remain, though: Is it the urgency to close deals before the end of the year? Will this momentum carry past Election Day, and past Dec. 31, 2012? And what’s this all mean for the economy and for small and midsized business owners in the New York metropolitan area? The short answer is that it depends on who you ask. Here are some general thoughts on what businesses should be thinking about and doing over the next several months:
- Business owners shouldn’t only be looking at the election, but at other factors, as well, such as the cost and availability of capital from a variety of sources, the stock market, consumer confidence and general business optimism.
- From my perspective, the general sentiment in the business community is positive, or at least trending that way. Some industries are more positive than others, of course, but there’s been a slight uptick in real estate values, and more IPOs now than any time over the last several years.
- Now may be the time to take a chance, especially if changes in the marketplace warrant it. If other business owners are waiting until after the election to do anything, acting now may provide your firm with a competitive advantage.
- There is an old expression that figures lie and liars figure, so take all the statistics being thrown around by both political parties with a grain of salt.
While a portion of small and midsized business owners have been waiting out the election cycle, smart business people have examined a variety of scenarios, and continue to examine them, making plans for a variety of possibilities. Because tax policy may not be settled until after the election doesn’t mean business owners can’t begin planning now. It may be worthwhile to map out the different likely scenarios and have a strategy in place prior to the election. Then, based on economic policy decisions, business owners need only to fine tune and implement their plans.
Corey L. Massella, CPA, is a partner with the accounting and business consulting firm Citrin Cooperman, and is the CEO of the firm’s SEC Solutions Group. He brings more than 20 years experience in counseling entrepreneurs in financial and business strategies, including structuring, negotiating and executing mergers and acquisitions, completing due diligence and preparing companies for public offerings. He is also a board member and sponsor for the Financial Executives Institute (FEI), Keiretsu Forum and the Long Island Capital Alliance. He can be reached at 212/697-1000 or firstname.lastname@example.org