Cash Flow Growth in Uncertain Times

Without question, these are very uncertain times. With further tariffs pending in the China trade providing no clear picture for the macro-economic impact, the outcome of the Brexit negotiations unknown, a changed political environment after the fall’s mid-term election in Washington and a stock market showing signs of wavering with a Federal Bank not quite clear about further rate hikes, it will be difficult to predict business activities in 2019 in general – and for mergers & acquisitions in particular.

“Again and again, we have heard a continued ‘dampened optimism’ from business owners over the past three months, specifically, at our recent fully booked Princeton seminar, while at the same time, there is generally no clear prediction to the business challenges in 2019,” says Achim Neumann, President, A Neumann & Associates, LLC, a New Jersey based Mergers & Acquisitions advisory firm  “however, mid-sized business were always confronted with macro-economic challenges in the past and the better a business is prepared, the better are the opportunities to come out like a winner, generating cash flow growth in the process and be positioned for a business sale. Here are the top 4 suggestions from successful entrepreneurs we have heard repeatedly.”

Revisit the general business plan: there is no better time than in an up-cycle to thoroughly review the business plan. The focus should be on expanding campaigns to grow the top line and allocate resources accordingly, and to prune programs that will not result in growth.  If done properly, the cash flow impact will be neutral, but even if the cash flow requires investments, it’s in slower times that a business can foster its market position versus competitors. More importantly, if a business sale is contemplated in the mid term, a good business plan will provide the additional benefits of providing a clear growth path for the new owner and thus, making the business more attractive for an acquisition.

Strengthen customer relationships and acquire new clients in the sales process:  taking stock of the company’s strength, existing customer relationships need to be reinforced and new customers should be approached for growth. New ways of providing additional value-added to customers need to be explored in an ever changing competitive environment by reaching out to customers and exploring their needs. A good research effort can make a significant difference, in particular, considering the tremendous customer acquisition costs in today’s environment. A company’s marketing and sales can almost certainly be strengthened by joining networking events, business associations, exhibiting at regional trade shows or speaking at key events.

Reinforce the internet online marketing campaign: with the internet taking an ever more important aspect in every business’s marketing, the visual appeal of a web site, the depth of product/service content and information, the ease of handling order placements and a company’s responsiveness and follow-up to customer inquiries from the web, not only leaves a (potential) customer with a first impression but can also result in a ‘life-long’ customer relationship thereafter.  Relatively minor expenditures can make already have a significant web impact to most businesses.

Secure employees and review internal operations: whereas a decline in economic activities might suggest cutting employee wages and benefits as recently reported for GM, one should remember that competitors are looking exactly for such opportunities to poach the best performers. Reversely, retaining employees in hard times will translate to a lot of goodwill in good times. There is always room to streamline internal processes, to make a business more efficient and a reallocation of human resources might be a better solution than reducing staff (and to avoid the tremendous cost of re-hiring at a later point)

In sum, whereas the economy continues to grow nicely at this time with very few ‘dark clouds’ on the horizon, this will be a good time to review a company’s operations and to weight what actions are best to address the unknowns for the future. A well-prepared business is always best positioned for a sale, regardless of the economic cycle.