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2020 Predictions

It’s 2020. A new year, a new decade. So, what’s coming for you and your business? Here’s a shortlist.

Here we go!

  1. Prices Remain High - In 2020 prices for great businesses will remain high. There continues to be a very large amount of capital in the market, but not enough great businesses to spend it on. So, when great assets are found, buyers will continue to remain willing to pay up for a good thing.

  2. Recurring Revenue - Recurring revenue will continue to be the holy grail of pricing models. Companies with predictable monthly revenue and strong renewal rates will be in the drivers seat of the negotiation process. By creating a recurring revenue element to your business you reduce risk to potential buyers and when renewal rates are strong, you have extraordinary control of whether you sell or hang on for another year or two.

  3. Great vs Average Gap Widens - Great companies will sell for a premium. Average companies will simply not sell. It’s an election year, many expect an economic slow down or correction and as such, average assets will remain untouched by savvy investors looking for strong returns. This gap has always existed but it will widen in 2020 as potential acquirers and investors get even more strategic and tactical with their funds.

  4. Healthcare Heats Up - Healthcare companies have been on a tear for awhile now, but this trend will only continue. Multi-office practices will remain a key target of private equity and can potentially drive a premium in the market-place assuming things like financials, succession plans and AR departments are working seamlessly. *Side note - the less your practice relies on formal insurance reimbursements, the better.

  5. Fundraising Slows - Capital raising will slow in 2020. While 2019 was a record year, the election and economic debate of a correction will slow fundraising particularly after the summer. If you are raising a fund, start now and close commitments early.

Bennett Smith