Business Opportunities in the Current Market? – 2018
Business Opportunities in the Market? – 2018
Market Watch – The Economic Indicators before you Buy or Sell!
Market watch and financial indicators, are valuable to learn when deciding to buy or sell a business.
This is because, financial indicators are present when the market
shifts to either core direction, recession or expansion.
This is because each indicator tells a story.
You just must look for these indicators, and you will see for yourself.
For example, employment levels will continue to rise with great numbers.
So, during an expanding market you will see lower unemployment rates.
This would be an example of an indicator or market marker.
Another indicator according to the consensus is, during a market expansion,
the stock market will be doing well with the country’s GDP or gross domestic product count growing.
These are all indicators pointing in a strong and healthy economy direction, expansion.
Recession versus Expansion
The opposite is true during periods of a recession. For example, unemployment rates
would be higher, with a low gross domestic product and stock market.
So, as you can see, you do not need to be an expert in the macro level of economics to understand this measure.
Truly, all you must do is just listen or watch some sources of mainstream media to see these trigger points.
Any news station will report on the new findings of the economy if these indicators take effect.
You will hear or see something as this, “Breaking News, just in,
Gloomy reports back on unemployment rates, weak GDP and stock market just dropped considerably.”
If you do hear or read these words from your news channel preference,
then you have just experienced the general consensus sensation.
Sources and Components
So, a little Wall Street Journal here, an occasional CNBC show there,
all showing an occasional financial advisory or two will do the trick.
Obviously, you will want to do a little more homework than just watching and reading on t
he market, if you are serious in selling your company.
These indicators may not be as obvious, or you may have to watch
the market closely, for upcoming trends or industry insights.
All in all, being proactive on every front is your best measure to success as a potential business owner seller.
There are a lot components and factors that make up the ultimate decision of selling your business.
So, after you have done some market watch, feel confident in
knowing what period of market you’re in, whether it be a period of expansion or recession.
The next step is start watching the true players of the field in your industry.
Remember, a lot of industry leaders are buying and selling, or both no matter the economic conditions.
Or in some cases, they know who is.
Word of mouth in this industry is sometimes the best method of doing a business listing.
They are the fastest and smoothest business transactions out there.
It takes buying and selling to a whole new level and user experience.
Mergers and Acquisitions Activity – The Process of the Business Cycle
So, before we talk about the cycle of the business process, let’s look inside a
less talked about contributing factor to the process of the business cycle.
This factor is the human emotion and relationship factor. It constitutes for
major change during both upstream economic times, and downward financial times.
You are probably thinking that numbers and logic should be topics of discussion
in this section, it is, but the human aspect of the business cycle is a must first.
It influences the market and acquisition marketplace in a way less common talked about.
For example, when the market is on fire, and hot as can be, most corporate companies,
or public companies in America are buying up other companies.
This is regardless of paying a higher purchasing price during financial expansion.
The reason for this purchasing increase is, that shareholders demand it,
and company leaders listen to their shareholders.
What do they hear when their shareholders speak, growth that is.
It is common knowledge that growth is required quarter after quarter, or in some cases, growth on top of growth.
So, if you were in their position, the fastest way to meet this demand would be to acquire and merge businesses.
Thus, reason why overspending normally takes place during these periods of economic strength.
Now during these buying frenzies, it is very common for all the
good companies to have been cherry picked out of the market batch.
If this happens, since the level of buying demand is so high, they just move on to more marginal companies.
Yes, these marginal companies may not mirror the prototype of what they usually purchase,
but something is better than nothing during these periods of high growths.
Human Element Exposed in the Marketplace
This is when you see the human emotion of the business cycle. This frenzy like
atmosphere creates for a level of illogical thinking. It’s as though they buy as there is no tomorrow.
This is not the best way to increase a healthy business portfolio.
During normal times, this type of thinking would never go over in a boardroom discussion.
Increase the degree of hotness in the market, add some bait to the mix and
watch what happens. It is a sight to see and sellers know this behavior and mindset of the buyers.
Sellers can use this to their advantage during their sale transactions.
So, again, you can see how the human emotion and relationship of people
and marketplace are achieved during these fruitful times.
Marketplace Dynamics – Counter-intuitive Flip side of the Market
Now, what goes up must come down. This is no different than in the stock market.
When the market starts to shift towards a recession period, the human
emotion element sets in once again. The only difference is, now the behavior is restrictive and limiting.
Meaning, this is not the time where valuable employees are given pay advances or pay raises.
The climate in the workplace would feel completely different to that of a normal employee.
They would see their fellow counterparts being laid off from work,
after many years of employment with the same company.
Living Costs vs. Living Wage?
Or, have their hours reduced where a livable wage is unheard of. Or in some cases,
complete closure of certain operations, and the relocation of other locations and positions.
So, a lot of internal shuffling within the workforce, on many levels is performed under these market conditions.
An uneasy feeling for current employees of these corporations to continue working in.
This is because these corporate leaders are not going out and buying or acquiring new companies.
This reduces the need for added help, since work projects are now released.
Life Cycle of a Business Acquisition
The acquisition of new companies creates jobs. The opposite effect happens
with the labor market if acquisitions and mergers are not happening.
Therefore, in periods of a rescission, you will see one financial indicator always increase, the unemployment rate.
Now you can see why this would occur.
If all sudden the cash flow for buying new businesses is halted after such an upturn,
it will have a noticeable effect on the economy in so many areas.
The more noticeable as we mention are job creation and job security.
The other can be the decline of the stock market.
This is because, if buyers are not buying, you will notice
this in the stock market value, and marker direction.
The Human Influence
Many people think that this is the time when buyers do buy, because of great deals.
But, as we have mentioned above, the underlying indicator that influences sound judgment is the human emotion.
We are triggered by emotions as humans, and unfortunately the need for more,
or greed, is one human emotion many leaders of companies fall prey to.
So, as you can see, corporate decisions are very different in these economic times.
This is when corporations start looking at cutbacks.
The labor force is the first area where layoffs will occur, and the cycle begins.
This is the time you will start seeing all the indicators of an economy shifting into a recession period.
Now, you ask or wonder why this occurs. There are a multitude of reasons for an economic down shift.
But to keep focus on the topic of human emotions, and the mentality
of the market, this has to be examined just a little bit further.
Bad Times and Being Proactive
The human emotion unfortunately does not plan for bad times in the economy.
They are more reactive in this area than proactive, which is the problem in of itself.
If a well thought out game with strategics was implemented in tough times,
as well as good times, it could have a nice balance. Of course, this will never happen.
And, for obvious reasons. If you have shareholders constantly on you for growth,
you enjoy the growth periods and greed start to seep in,
you can see the human business cycle of this wave.
So, the problem is obviously more systematic than we have touched on here,
but you can see the core issues in why things happen in the marketplace.
Just keep in mind that these corporate decisions are made from human beings.
These people do fall prey like we all do to outside temptations and influences.
Obviously, when you’re in this position, and at this level, where your decisions can
affect the livelihoods of many people and families,
then you should always reevaluate your decisions with others in mind.
Corporate Pie – Shareholders Mindset
In most cases these corporate figures do have others in mind, it’s another type of “other” they have in mind.
These others are also commonly known as shareholders.
These shareholders just take a larger piece of the business pie. Some would argue the entire pie.
These corporate leaders fear that they will missing out during the good times and is reason for the increase in purchasing.
Then, unfortunately, they do the complete opposite during bad times.
They almost always will overestimate how long the bad times will last.
So, like many of us do, we overspend during the good times and clam up during the bad.
This is a very predictable pattern of the human condition, and is triggered by emotions on both fronts.
During these financial periods, many boards will instruct their executives to cut costs no matter what.
This means lay people off, and hold on to cash flow no what the conditions are or who is affected.
Business Opportunities – Downturn of the Economy?
A recession will last two consecutive quarters with a negative GDP growth.
This is how economists refer to a decline in financial strength, a decline in Gross National Product as negative growth.
So, when the GDP decreases, profits disappear and cash on balance sheets now becomes an anomaly.
Now, if you are a seller during the good times, you understand this unsuitable urge to buy,
but also remember you are still playing with experienced sharks.
They know that when the market is good so is the stock price.
Be careful not to sell your business with stock options or consideration.
This is because when the stock market is booming, you know that it is only a
matter of time when it will decline, and when this happens so, will your stock price.
So, you do not want to take such a trade during a sale, unless you have examined all your options.
Because, the last thing you want is to take on an inflated stock, as payment and have that stock crash soon.
Check your local business broker for more market information, when ready to buy or sell a business.