del.icio.us
Digg
Sphere
Stumble
Technorati
Twitter
Rent, Don't Sell: Lessons For The New Economy
By Bizbox
Via Independent Street, financial services industry researcher Sageworks has done a study on which industries' small businesses have been hit hardest by the recent economic downturn, and which industries' small businesses are best set to ride out the current and, it looks like, future credit crunch.
For the former measurement, Sageworks uses the percentage change in the given industries' small businesses sales (Sept. 2007-2008), which is logical. For the latter, however, they interestingly examine the somewhat obscure statistic known as EBITDA. The measurement, which is favored by private equity firms, does a good job measuring cash flow--after all, what could be more essential to survival in today's credit climate? Numbers, and some thoughts, after the jump:
The most negatively impacted industries were:
-Residential construction (-1%)
-Furniture stores (-1%)
-Cement/concrete manufacturing (-5%)
-Lumber wholeselling (-7%)
-Real estate agents/brokers (-8%)
And the ones best set to thrive, by EBITDA margin, are:
-Oil and gas extraction (18%)
-Dentist offices (18%)
-Accounting/tax preparation services (19%)
-Traveler accommodations (24%)
-Lessors of real estate (27%)
Well, the lesson from the first list is pretty much the definition of blatant: any industries that relied upon the housing market did not have a good year (you know, in case you hadn't heard). If you're a small business in that arena, you don't need us to tell you of your troubles, but still: unless you are wisely flush with cash, you really may want to consider something else.
The second list is more illuminating. Paradoxically, the industry whose small businesses are best set to thrive is also housing-related: except it's based not upon the selling of housing but upon the renting of housing. This makes sense: as buying a place to live became a poorer investment, renting--which isn't an investment but is both cheaper and requiring of less credit than buying--became a more attractive option. It should be surprising to see oil and gas extraction on that list: energy's rise has been the story of the past year (although oil's fall over the past several weeks has been precipitous, to say the least: futures are currently trading at $82 per barrel. Dentists' offices is perhaps the most interesting one. But it makes sense: no matter what the economy or the state of the credit markets, you're always going to need to go to the dentist (and so are your kids). It is industries like that--truly old reliables--that are set to make it through this storm just fine. Sometimes, slow and steady really does win the race.
Comments (0)October 14, 2008 1:15 AM
