Written by Stephen J. Furrer, CPA, CEPA, ABV
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.
(originally published in September 2012 eNewsletter)
Steve Furrer, owner of Furrer & Associates, Inc., and new owner of M.J. Baker & Associates, has operated a successful accounting practice in Westlake, Ohio for 19 years. Steve earned his Masters in Business Administration from the University of Michigan in 1986 and his Bachelors of Science from Indiana University in 1980. Steve advises clients in a variety of areas including exit planning, financing assistance and advanced tax and corporate structure issues. He is a member of both the American Institute of Certified Public Accountants (AICPA) and the Ohio Society of CPAs and holds the Accreditation in Business Valuation (ABV). Steve most recently earned his Certification as an Exit Planning Advisor (CEPA).