ENGLEWOOD, CO (PRWEB) August 29, 2014
The market for selling privately owned businesses is heating up. After the wearying doldrums of the Great Recession, high stock prices, low interest rates and years of profitability make this an attractive year for an exit strategy, according to a recent national study by BizBuySell Insight.
The report (http://www.bizbuysell.com/news/article095.html) found that the number of small-business deals that closed in 2013 increased by 41.7 percent in the third quarter compared to the same quarter in 2012, with restaurants and retail businesses seeing the most action.
The median sale price for small businesses in Q3 of 2013 was $180,000—up 2.9 percent from the same time the previous year, though a little below the median asking price of $199,000. On average, selling prices were equal to 2.19 percent of cash flow.
But the decision to sell a business can be fraught with emotional stress and lots of practical concerns.
“Building a business was not easy, and the decision to sell may not be easy either,” Mark Paller, President of Paller Financial Services in Englewood, Colorado, says. “For most entrepreneurs, deciding to sell their company is a really big deal.”
Paller notes that the decision can be harder when there are investors, funding from friends and family or employees who count on the business for their livelihoods.
“In this scenario, the idea of selling the business and moving on with life can be daunting,” Paller says.
And he points out owners must answer many questions, including:
- How much is the business worth?
- If I sell then what will I do with my time?
- What do I do with my money?
- How do I take money out to live?
- Will it last?
Paller says owners know better than anyone the blood, sweat and tears that went into building their business.
“From the outside, a business may look like an overnight success but, as the owner, the owner knows how long it really took,” he explains. “Most businesses are grown deliberately over time with a tremendous amount of hard work, sleepless nights and lots of money on the line.”
But, as the years pass, technology advances, costs rise and competition increases, the time comes eventually for new talent, new energy and maybe some new capital investment. Over time, the entrepreneur starts to consider retirement.
Paller advises his clients that, if they hope to fund their retirement from the sale of their business, it will be imperative to ensure that it retains its value and that buyers will perceive this value.
“The buyer must recognize an opportunity for generating enough revenue to reimburse him or her for the cost of the business and create ongoing profit,” Paller says. “The new owner has to see as much potential in the business as the original owner did when they started it.”
Paller says an owner should also get a personal financial plan done before trying to sell. One of the most common reasons for seller’s remorse is that sellers often find out they didn’t end up with enough money to reach their goals. A financial plan helps determine how much money they need and set reasonable expectations.
“Today’s investor faces limitless and confusing choices,” Paller says. “Without the benefit of experience, it is easy to take the wrong path. Having a team of advisers — an accountant, a business intermediary or broker, an attorney, a financial adviser and a business generalist — who have been down this road many times is crucial.”
He reminds business owners that the goal of a professional financial planner is not to make a fortune for the business owner. It is to preserve the one they have already made.