Forecast: A New Year's Guide for CEOs

Various Inc. editors and other experts discuss a number of topics and how they relate to the 1996 economy.

Tweet

Forget the government's indicators. What will happen to loan availability? The cost of a sales call? The labor pool? Here's Inc.'s guide to the business climate that counts

Every new year brings the same old thing. Economists make predictions about what the overall economy will do. Then business owners try to make sense of the conflicting forecasts. You might as well read tea leaves.

But not this year; not at Inc. Instead of consulting the bottom of your cup, you should read our answers to some down-to-earth bottom-line questions about aspects of the business environment that affect small-company owners daily. We wanted to know, for instance, how banks are going to approach small-business lending in 1996, how much direct-mail costs are likely to go up, and which pending congressional legislation small-company CEOs need to watch out for. And we wanted to know how smart company owners use the information available to them to make plans for their businesses.

We called on four veterans of the magazine's Hands On section, writers and editors who deliver solid how-to information each month. Their reports will give you heads-up warnings about dozens of changes -- some of them predicated on legislation still pending as we closed this issue -- that you'll want to keep an eye on.

We also talked to two experienced small-company CEOs whose views of which way the business environment will be heading this year couldn't contrast more. You don't have to believe either one of them. But you ought to consider the implications for your own company of the scenarios that each of them paints. Jack Stack and Norm Brodsky face off [in [Article link]].

And we talked to smart CEOs across a variety of industries to find out what kinds of strategies and techniques they use in making their own business plans -- whatever the economic forecast. You'll learn what they know [in [Article link]].

-- Martha E. Mangelsdorf

FINANCE
Let's start with a topic dear to an entrepreneur's heart: money. The outlook for bank loans in 1996 is not good. "All the megamergers we've seen in the banking industry in 1995 -- which should continue this year -- do not bode well for entrepreneurs," notes Barbara Blum, CEO and president of the Adams National Bank, in Washington, D.C. "Megabanks will want to finance megadeals, not growing companies."

Her advice to anyone shopping for credit: "Make certain any bank you approach really does care about supporting growing businesses. One way to do that is to find out whether it's a certified Small Business Administration lender -- even if you're not in the market for an SBA loan."

On the other hand, the prospects for finding other forms of financing are brighter for companies with good financial histories or solid market positions. Venture capitalist Alan Patricof of Patricof & Co., in New York City, notes that "many venture funds are currently in good positions to make investments, because the public market has given us the opportunity to sell holdings and increase our liquidity."

Prospects for initial public offerings are also auspicious, at least for a time. "Expect this market to remain healthy, so long as interest rates remain stable, as seems likely for '96, and the stock market stays strong," predicts Stephen Adams, a managing director at Van Kasper & Co., a San Francisco investment house.

The appetite for private placements of debt and equity should withstand even a market downturn. "Since these are typically long-term investments, they're not really tied to whether the stock market goes up or down," notes Kimberly Weisul, assistant editor of the newsletter Private Placement Letter. "What matters much more," she says, "is that there is a lot of money chasing after investments."

That's the outlook for getting money; the prospects for keeping more of it are also bright, though iffy. This should be a year of important tax changes that will bring opportunity to the owners of many fast-growing companies. One reason: tax reform, 1995 style. Although key financial legislation was still on the table at this writing, entrepreneurs stand to benefit from several likely reforms. Take the capital-gains-tax reduction, for instance. "During 1996 that should accelerate the pace of mergers-and-acquisition activity and public stock offerings," suggests Robert Willens, a managing director at Lehman Brothers, the New York City-based investment house.

Tax relief should also include more generous depreciation allowances, Willens says. He expects new depreciation schedules to permit small companies to claim bigger immediate write-offs of capital purchases. The resulting tax savings, he says, "will make it possible for business owners to invest in more plants and equipment this year."

Anticipated estate-tax reforms are " very different -- and potentially much more significant -- than much of what we've seen in the past," claims David Scott Sloan, the chairman of the trusts and estates department of Boston law firm Sherburne, Powers & Needham, PC. That makes this year the right one for business owners to design estate plans that really fit their long-term goals.

 1 | 2 | 3 | 4  NEXT