It seems like we’re at a fork in the road: there are some positive signs that
the economy is entering the earliest stages of a long term expansion, but at
the same time, if we dare read the headlines, it seems we’re destined to repeat
2008.
It’s precisely because we’re at this inflection point that we see a lot of
business owners thumbing the eject button. If you’ve been thinking of selling
your business, here are seven reasons to get out now:
1. You’ve lost the stomach for it
A lot of business owners took The Great Recession in the teeth. If you’ve got
your business stabilized and the prospect of fighting through another recession
leaves you panic-stricken, it’s time to get out.
2. The worst is behind you
Let’s say you were mentally getting ready to sell back in 2007. Then 2008 hit,
and 2009 was your worst financial year in recent memory. You cut everything you
could in 2010, showed a profit in 2011 and now you’re starting to see some
profit and revenue growth. With your numbers going in the right
direction, now might be just the right time to get out.
3. The tax man is coming
Governments around the world are looking for money to fund the cost of an aging
population. In the U.S., the capital gains tax rate is set to go up after
2012.
4. Nobody is lucky forever
If you’re lucky enough to be in a business that actually benefits from a bad
economy, congratulations. You’ve probably just had the three best years of your
business life. But no cycle lasts forever and right now may be a great time to
take some chips off the table.
5. The coming glut
As a business owner, demographics are not on your side. As the baby boomers
start to retire, we’re going to have a glut of small businesses come on the
market. That’s great if you’re buying, but if you’re a seller, you may want to
get out ahead of the flood.
6. The closing window
It’s been tough for private equity companies to raise money since 2008; so many
firms had their last successful round of fund raising in 2007. Many of these
funds have a five-year window in which to invest; otherwise they are required
to give the money back to the people who gave it to them. Some boutique private
equity firms will make investments in companies that have at least one million
dollars in pre-tax profits (larger private equity firms will not go below $3
million in EBITDA); so if you’re in the seven-figure club, you could get a
bidding war going for your business among private equity buyers keen to invest
their money before they have to give it back.
7. A good time to be liquid
The stock market has been swinging wildly lately which is why it would be nice
to get liquid. With cash in the bank, you will be able to take advantage of a
fire sale on the stocks of good quality companies should the market sink.
If you feel like a gambler at a blackjack table with everything riding on the
outcome of one hand, it may be the right time to take a few chips off the
table.
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Wondering if you have a sellable business? Contact the MAXIMA Group for a consultation. We focus on privately held companies with annual revenues of $3 million to $60 million. We also advise larger public and private companies on buy-side engagements.
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