The findings of the poll are clear. Business is robust as the economy remains strong. While there is no imminent collapse, there are warning signs that a downturn in the business cycle may be in sight.
As a possible slowdown begins to emerge on the far horizon, the stone, sand and gravel industry finds itself is in a period of sector-specific volatility and transformation. Global forces such as consolidation in the aggregates sector of the economy, fuel cost, etc., are beyond the control of Canadian independent SSG operation owners. But these forces have a substantive impact.
Complicating these are homegrown challenges such as the high cost of new license requirements. At the same time the sector is paralyzed by inordinate delays in licencing new sites that will allow new entrants and growth for existing operators.
Demographic influences are playing a part. A great many independent owner/operators are looking for succession plans or an exit strategy as they face voluntary retirement. But the available space for building enhanced value in the business and/or greater retirement income outside the business is shortening as they age.
All of these factors point in our opinion to a compelling opportunity for owners of stone, sand and gravel businesses in Canada to use the still-growing value of their prime asset - their commodity reserve in the ground - to access large pools of capital. In the current economic climate, the growth rate in the value of the commodity is greater than the cost of refinancing. In essence, what's in the ground is more valuable than what is in the bank and the spread in those values can be leveraged to build personal or corporate wealth.
A substantive infusion of capital can be used to make a strategic re-investment in the business much beyond the means of owners restricted to re-investing actual profits from the business when and where other requirements for the revenue permit. A large pool of capital can have an equally large effect on the business. Or it can be used to create personal wealth by investment outside of the business.
It would be prudent for some SSGO owners to act soon. Consolidation forces throughout the industry may be putting pressure on some to seize the chance to leverage their assets for corporate and personal value building before a merger or acquisition puts that asset (and opportunity) in someone else's hands.
Refinancing: A Team Effort
In the larger sense, the actual refinancing of an existing asset for the owner of a successful stone, sand and gravel operation is not overly complex. It requires using strategic financial instruments to make large pools of capital available to those who qualify.
The challenges are in the execution of the project. Expertise is required in the design and use of these financial instruments. Specialized analysis of the economics of individual commodity reserves is necessary. Finally, access is vital to a merchant bank that understands the aggregate sector and that can brought on board on a case-by-case basis.
It's a team approach that requires co-operation and a mutual objective for the owners, financial planners, sector analysts and lending institution. They all must be focused on one objective: building value for a specific operation based on it's assets and it's potential.
This is the Jim Sanderson Group approach. We understand the sand, stone and gravel sector of the economy because it is our only practice area and have developed significant sectoral knowledge. Our experience and expertise in finance is strengthened by access to an unparalleled team of experts in insurance, legal counsel, trust and estate services and merchant banking.
Success for refinancing begins with the belief that your enterprise has growth potential that should allow you to do more than you are doing today to enhance the value of the business and build personal wealth for you - the owner.