When 2 Million Dollars is Not Enough to Sell

Not everyone wants to sell when they feel as though they must sell. Life changes, such as divorce or illness, can trigger the sale of a business. Everything from declining business revenue to partnership problems and more can send business owners scrambling for the exit sign. However, selling isn’t always an option, especially for small businesses. In this article, we will take a closer look at one such scenario.

The business under consideration is a successful distribution business, which is also a classic example of a value-enhanced business. The two owners each draw several hundred thousand dollars from the business annually to go along with a range of other benefits. Hypothetically, if the business sold for $2 million dollars, each of the owners would receive approximately $1 million. This sounds like a sizable amount. So, what is the problem?

When one stops to factor in such variables as taxes, closing expenses, and debt, that $1 million-dollar number shrinks dramatically, leaving each owner with much less—perhaps as little as just two years of income. In such a situation, selling isn’t a great idea. Many owners of small companies want to “cash in” and retire, only to discover that their business isn’t worth enough to do so.

Owners who want to retire but can’t afford to do so are in a difficult position. Such owners may have already “checked out” mentally and, in the process, lost their focus resulting in a failure to both invest financially and creatively in the business. In turn, this further decreases the value of the business, as competitors likely move in to fill the void.

So, what does all this mean for business owners? Business owners don’t want to get stuck in the position presented. Instead, they want to sell at the optimal moment, when a business is at its high point and the owners are not considering retiring or feeling as though they must sell.

Determining the best time to sell can be one of the single smartest business decisions a business owner ever makes. Working with a professional and experienced merger and acquisition advisor is a fast and simple way to determine if the time is right to sell your business or if you should wait. Waiting until the optimal moment to sell has passed you by could be a painful experience.

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Copyright: Business Brokerage Press, Inc.
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