Houston Businesses Continuing to Fuel Economy - Add Jobs

Houston Businesses keep economic engine pumping, maintaining the City's position as one of the fastest growing employment cities in the U.S.

Texas was fifth in the nation for August non-farm job gains, according to the Bureau of Labor Statistics.

Employment in the Houston Metropolitan Area was up by 8,600 jobs in August compared with July and by 64,400 compared with August 2006. The unemployment rate was 4.1 percent, down from 4.6 percent in July and 5 percent in August 2006 according to Texas Workforce Commission September 2007 report.

In Texas as a whole the unemployment rate fell to 4.2 percent in August, down last month’s 4.4 percent, and down significantly from 4.9 percent a year ago. Employment in Texas remains strong, despite the U.S. economy’s loss of 4,000 jobs this month. Texas employers have added 229,000 jobs in the past year.

The job figures indicate relatively good economic health in Texas even as the national economy appears vulnerable to a slowdown.

"The state economy is still growing strongly," said Fiona Sigalla, an economist at the Federal Reserve Bank of Dallas. "We are growing much more strongly than the rest of the country, and should continue to do so."

Texas economy is performing better than the country as a whole. And, according to statistics, Houston's economy is doing better than Texas' as a whole.

Don't Start a New Business -- Buy an Existing Business

Don't start it, buy it! Why should you buy a business versus start a new one? Here are ten solid reasons:

(1) The success rate for existing businesses purchased is significantly higher than the success rate for a new business startup. Statistics indicate a 90% failure rate for new business ventures within five years, while business brokers report that 70% of businesses they sold are still in business five years later. (Economist, Brian Headd, with SBA Office of Advocacy, report -- Redefining Business Success: Distinguishing Between Closure and Failure.)

(2) An established customer base means immediate cash flow!

(3) Bank finance options: It is much easier to find capital to buy an existing business than to start a new one. Why? Banks know the statistics. Bankers are much more willing to lend money when there is an identified source of repayment already in place (i.e. cash flow).

(4) Seller financing: Many sellers of existing businesses are willing to provide financing at very reasonable terms. Why? For income tax reasons, to increase the probability of a sale, and to increase the overall net they receive from the sale from interest on the loan. And, if a seller is willing to carry back any part of the purchase price, it tells you the seller has confidence that the business will continue to succeed under your management.

(5) Projections for a startup are nothing more than an educated guess. Projections for existing businesses for sale are based on historical results. Which is more reliable?

(6) Startups always cost more than expected and may use up initial financial resources budgeted for the venture. This is one of the reasons start ups fail within the first couple of years. Just like a baker making bread from scratch, when launching a new business, you'd be rolling out the "dough" without knowing if there will the anticipated market for your new product or service. Mistakes will be made along the way and new approaches, that require additional expenditures, will need to be formulated. You will need to stay "fluid and flexible" so you can bend and twist along with the business as it takes shape.

(7) You may actually need to come up with less cash for your down payment plus working capital when you buy an existing business than you would need if you started your own new business venture. Why? With owner financing and a performing track record, your existing business purchase is very bankable...a new startup is not. The cash required to get the new business to a cash flow positive is unknown. Unless you are rolling in "dough," this is problematic and threatens ultimate success.

(8) An established web site presence. Although each business will vary, most businesses rely to some extent on a business web site. The longer a web site has been established, and the more traffic that web site receives, the more value search engines place on that site. This is important as your web site ranking determines your placement in search engine results. In other words, building a new web site is not enough. Customers still need to find it. A quality, established web site can be a real asset, something that a new startup will not have.

(9) Many businesses listed for sale are fairly priced. One can often find a business acquisition whereby after the sale the new owner will be able to make an immediate livable salary with enough left over to pay debt service on the new loan and get a reasonable annual return on their investment.

(10) Less stress and strain: An existing business acquisition does not mean stress free. But it will be significantly less than if you were always wondering and worrying if customers would really come and, if and when, the monetary investment would pay off on a start-from-scratch business venture.

Buying an established business is a more efficient way to business ownership. Here's a list of additional advantages of buying an existing business not discussed above:

Established suppliers / vendors
Furniture, Office Machines & Communication Equipment are in place
Experienced Employees
Relationships with professional advisers, insurance companies, advertisers
Location demographics has already been market tested & proven
Market presence
Policies and procedures are in place
Pricing and competition are already known quantities
Immediate Growth Potential

In the long run, buying an existing business is less costly than launching a start-up. Even if you pay a premium price for an existing business, at least you know what you are getting for your investment and can anticipate, to a certain degree, what the future will bring.

Finding an existing business with all the ingredients for success already in place is a safe investment and a great platform from which to grow and launch your entrepreneurial new ideas. By far, a much less risky avenue to achieving business ownership. No matter which road you take, however, there are no guarantees. You still need to be a sharp businessperson to make it work. Find out if you got what it takes to take the leap to business ownership. Take this 25-question entrepreneurial test .

Houston's Economy Forecasted for Healthy Growth Into 2009

Since 2005 Houston has been enjoying employment growth at a higher percentage rate than the rest of the U.S. and is anticipated to keep the city's economic engine running.

Houston Ranks Third in Employment Growth in U.S.

After peaking late in 2006, the Houston economy has steadily lost momentum over the past six months. Despite this recoil, Houston still ranks high (in third place) among the 25 largest metro areas in the U.S. in terms of job growth, (+3.1% year over year in June 2007). Major sectors contributing to this strength include construction (+7.0% year over year), professional and business services (+4.4%) and leisure and accommodation services (+4.4%).

The Energy/Petrochemical Sector is the Key Driver

The key driver of Houston’s economy over the past two-and-a-half years has been the energy and petrochemicals sector, which is also the metro area’s major employer. High oil prices and healthy growth of profits in the industry have led to a surge in oil exploration, as well as to an expansion of downstream facilities (refining and chemical manufacturing).

The positive outlook for oil prices and for petroleum energy-related activities in general will continue to support Houston’s demand for labor. It will also continue to make the metro area attractive to job-seeking immigrants from other regions over the next several quarters.

Despite high levels of net migration (with an extra boost from post-Katrina refugees), Houston still holds a moderate ranking in terms of housing affordability — position 107 out of 215 markets — according to the NAHB/Wells Fargo Housing Opportunity Index. However, single-family housing demand, particularly among first-time homebuyers, has been sideswiped by tighter restrictions from sub-prime mortgage lenders. Residential building permits were off by 37% year over year in June, their largest decline in over ten years.

Non-residential Construction particularly Strong at Present

Over the past year, while residential construction has slowed dramatically, non-residential building has exhibited strength. The value of non-residential building permits for new structures in the City of Houston is up by almost 40% year to date compared to last year, while spending on non-residential additions and alterations is up by 46%.

Moving forward, there is a risk that recent turmoil in financial markets will erode both consumer and business confidence in Houston. This could cause growth to pause briefly. However, oil prices are expected to remain in the range of $70 to $75 US. Therefore, the outlook for Houston’s critical energy sector — including oil services and machinery — remains quite positive. This will cause growth in the Houston metro area to continue at a healthy pace through 2008.

From Reed Construction Data, BuildingTeam Construction Forecast - John Clinkard (Aug. 31 2007)