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Selling your business in a down market

We received the monthly BizQuest newsletter and had to share the articleby Michael Coyle as it’s a very relevant topic and talking point which needs to be discussed between business owners and their advisers: Selling or planning an exit in a down market.

Statistic:  “”It is estimated that less than 15% of business owners have developed an exit plan from their business, despite the reality that it is a certain outcome for every business owner.”” 

Only 15%??  This is an alarming number, especially for baby boomer business owners.  The first step in this process is having an idea of what the business is worth through a business valuation.  Otherwise, the business owner is operating blindly due to the common errors and wrong assumptions in an owner-driven valuation.

“”We have been experiencing variable economic conditions in the last few fiscal quarters which seem certain to continue for the immediate future. Selling your business in what would be considered a weak economic time, however, can produce outstanding results based upon two realities:

  1. The value of closely held companies is most often determined by internal attributes of the business and less from external economic factors.
  2. QUALITY sells in any economic market.””

 If you own a stable and growing business, with predictable revenue and discretionary cash flow, you have a QUALITY business.  Size and industry will greatly drive the supply and demand of sellers and buyers, but during this economic down turn, it’s critical to protect the value you’ve established!  Don’t sit idle in a down market as this could greatly hurt your company’s valuation.  Owners who plan today, can execute tomorrow with success and precision.

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2 Comments on Selling your business in a down market »

We are representing plenty of internet business owners and selling their established profitable sites in this market rapidly – because of sound fundamentals, growth and good upside potential. If a business is solid and attractive it will sell in any economic scenario

John Chang @ 11:30 pm:

It’s an unfortunate but all too common truism that “if you fail to plan, plan to fail..”

In the case of business owners, as discussed in the article, these folks have devoted several years, if not a majority of their lives, to building their business.

Sadly, these folks realize all too late that there is no pot of gold at the end of the rainbow – at least it’s not one that magically appears, waiting for them to walk right up after they finally decide to retire.

No, the reality is that your average small business owner has worked so hard on keeping things running that they just didn’t have time to stop and think about “someday.”

But sure enough someday still arrives any way – often in the form of poor health or other forms of exhaustion / wear & tear. Now the owner HAS to face the fact that one way or another – he / she’s headed out the door.

Meanwhile, there is no succession plan, no buy-sell agreement, no will.. just a vacuum, and the universe abhors a vacuum.

So, life does go on. But it’s often a painful transition. Someone will be left to clean up the mess. Is this the legacy that owner meant to leave behind. Probably not.

In my line of work, business owners often approach me when they NEED to sell. That’s often too late. There is little, if anything, that I can do at that point, except to package what’s available and try to present things in the most favorable light.

Still, put lipstick on a pig – well, it’s still a pig!

That’s why I try to meet with owners well in advance – 5 to 10 years is the ideal horizon.

But, even if we meet 1-3 years out, we can sit down and discuss possibilities. How can we maximize the benefit to the owner?

Of course, “benefit” is a very subjective word. Everyone has a different concept of its meaning. What I consider valuable may be meaningless to you.

Only by sitting down to discuss your ultimate goals and ambitions can we begin to develop what you really want. By getting down to this we can begin to look at how your business can be a vehicle for getting there.

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