For small companies that can’t afford to sell, the reason for sale is often health-related or due to partnership issues. However, a challenging reason for sale is when the owners want to retire and live happily ever after. The problem is that these sales are often “event” driven and not well planned out. So, what can business owners do to ensure they get the best possible price for their company?
The owners of a small distribution business were in this situation. Even though their company was very prosperous, they were the embodiment of a value-enhanced business. This meant that they each drew about $250,000 annually from the business, plus cars and other benefits. If the company sold for $2 million, after debt, taxes and closing expenses, the net proceeds would be, let’s say, $1 million.
While this might sound like a good deal at first, it’s really only 2 years’ income for each owner. And that doesn’t even include the cars, health insurance, etc. So selling may not be an option for many small companies who are looking to retire.
There are many reasons why selling may be a better option than hanging onto your business and hoping for the best. For starters, if you’ve lost focus or enthusiasm for the business, it’s likely that your employees have picked up on that. This can lead to a decline in sales and profits. Additionally, if you’re not investing in the growth of the business, you may fall behind your competitors. And finally, if you wait too long to sell, you run the risk of losing key customers or employees.
Meanwhile, business owners who are thinking of selling their businesses, but don’t want to because “the time isn’t right,” should take the step that can make all the difference. They need to seek expert advice. At Gulf Coast Business Broker we can help business owners get the highest price possible for their businesses. By selling when the business is at a high point, business owners can avoid getting forced to sell later when the business is declining. Let’s have a conversation to make sure you pick the right time and method to get the best possible price for your business.