kiplinger connection
The economy • Tech costs • Small business

The economy: Commercial staying up; housing slump means better materials prices.
Tech costs: Business prices down, domain names up.
Small business: Selling your firm when you retire? Start now.

The economy
Factory output will grow 3% next year, half this year’s increase, as manufacturers adjust to slower domestic economic growth. Output has soared in the past 12 months, with firms stockpiling inventory to stay ahead of commodity prices, which are now rising more slowly.
Export-oriented sectors will do best in 2007 as overseas demand for U.S.-made factory goods slows only modestly. That’s good news for makers of airplanes and aerospace equipment, industrial machinery, telecommunications hardware, and electronics and electrical equipment.

Commercial building, though slowing, will still be robust. Office and industrial construction will increase 9% in 2007 after a gain of 10% this year. Many companies need more capacity after investment in warehouses and offices stagnated in the first half of this decade.
There's some relief ahead from costly construction materials. Builders' costs for materials are up about 30% this year. But gradually, the housing pullback will temper demand for gypsum board, lumber, etc.

Tech costs
Prices businesses pay for IT are coming down on several fronts. All-in-one data storage units will soon sell for less than $5,000. They can back up multiple servers and be as easy to install as a printer. They include products from Network Appliance and Hewlett-Packard.
Business security software will also get cheaper when Microsoft enters the market in 2007 with Forefront Client Security, a program to fight viruses and spyware. It was just a few months ago that Microsoft introduced its Windows Live OneCare package, which led to big price cuts. It forced Symantec and McAfee, the two market leaders, to reduce prices for consumers by almost half, even though they offer additional features.

Internet domain names, on the other hand, will be more expensive. Beginning in 2007, the Commerce Dept. will OK annual hikes of about 5% in fees for domain names. The extra money will pay for more security. The current system is regarded as vulnerable to professional hackers, who hijack business names and redirect unknowing surfers to phony sites.

Small business
Expect to see a lot more small and midsize firms for sale. Baby boomers nearing 65 and eager to retire will lead the charge. More than 75% of owners in a recent survey said they wanted to move on.
To beat the rush and get the best price, start planning now. That way, you’ll be ready when market conditions tell you it’s time. Too many owners hold off until they feel ready, then have to spend months putting paperwork in order, finding a buyer, and planning the transition.
Other tips: Diversify your customer base. Train middle managers so your departure won’t leave a huge void. And don’t pass up a good deal on a long-term lease. It’ll make your business a more attractive buy.