Are you looking to sell your business? Selling a business (especially in this economy) is one of the most important financial decisions that a business owner will ever make. After years of building a customer base and inventory, deciding that it is time to sell can be difficult, but selling can also free up a business owner to pursue other interests.
As with all organizational decisions, selling a business is very dependent on correctly timing the market. In order to get the most money, a company should be sold when it has the greatest potential to make money, but also while its current assets have a low market evaluation. In January 2012, we wrote a post on six key factors to think about before you sell. These conditions offer the seller the best values for his or her money while making the cost of selling the business cheap to the owner. The current economic conditions have created this environment for businesses in many different industries.
As a result of the recent recession, many companies have streamlined their operations and reduced their inventories. Although the economy is showing signs of a turnaround – it’s still important to know how to position your company in a tough economy. In short, many were forced to become leaner and more efficient. From a budgetary point of view, this means that many companies currently have their costs at their lowest point ever. Potential buyers of a business will look very carefully at these numbers in order to determine the potential profitability of a business. By trimming these costs, an organization has essentially improved its bottom line by eliminating expenses.Furthermore, the recent uptick in many leading economic indicators has shown that the economy is getting better. For a business, this means the potential for new customers and additional sales. For a seller, this means a high valuation for a business without having to actually show these sales. Buyers, however, will be willing to pay more for a business that they believe has a good potential for growth.In order to make the most money from the sale of a business, however, it is important to also have as low amount of money as possible currently invested in a business. A business that has recently purchased new equipment, for example, would have invested a lot of cash but would not have a high net worth on paper due to the depreciation of these assets. Instead, the ideal time to sell a business is before making large expenditures. The recent downturn in the economy has meant that many businesses have not made these capital expenditures.For these reasons, now is probably the ideal time for many business owners to seriously consider selling. Profits from selling a business are about to reach new highs, making this an ideal time to prepare to sell.