Should You Sell Your Business During an Economic Downturn?

Is it better or worse to be selling you business in a tough time? Like most business questions, the answer is “That depends on a lot of things.”

TAB San Antonio business coach, and author of 11 Things You Absolutely Need to Know About Selling Your Business, John F. Dini, shares his small business advice:

There is no good time to sell a business that is suffering from the “Dismal D’s.” Those motivators for a sale include Death of the principal, Divorce, Declining sales, Disinterest of the owner (burn-out), Disease, Debt and Disaster. If a business is selling for any of these reasons, it is almost always a bad time to be on the market.

For a profitable business with good management, systems and prospects, even slowing sales due to an economic downturn may not mean a deep discount on your selling price. This is particularly true if you have long-term records that show repeated rebounds after slow times.

In a recession, a new crop of qualified buyers enters the market. Growth-driven companies turn to acquisitions to make up for the lack of organic sales increases. Downsized executives buy small businesses to maintain their lifestyle. Investors seeking better returns than the market offers look for companies with solid cash returns.

Most importantly, when supposedly “safe” financial investments become more risky, owning a small business doesn’t look like such a roll of the dice in comparison.

Of course, getting financing for a small business acquisition is more difficult now than it has been in years. Banks are warier and are charging a higher premium. This can be a decided advantage for a seller who is willing to hold private financing on a sale to an economic buyer (usually one who is purchasing a business for less than $3,000,000.00). Well structured stock or installment sales could save many thousands of dollars in taxes—if completed before the expiration of the current tax structure.

If your personal vision (an integral part of your strategic plan) calls for exiting in the next year or two, don’t allow the bad news in the media change your plan. There are still many opportunities for a successful transition.