27 Jul Selling your business after the 2008 crash
Many business owners seem to be concerned about the value of their business now that they have experienced a severe decline in revenues after the 2008 crash. Some owner even think that in order for them to get what their business is worth they will need a number of years of recent history showing continuous growth. This type of thinking is somewhat incorrect.
During 2008 the U.S. experienced a market crash that affected every business owner in the country. Every investor knows about this tragedy and that no matter how well you managed your business before, during, and after your numbers will have been effected. What matters the most is that you survived the crash and you are now back on your feet. The key aspect of valuation after the recession is the 2011 and 2012 numbers year to date. Investors will be weighing the value of those numbers much higher than the 2008 and 2009 numbers simply because they recognize that it was a recession.
If you are considering the option of selling your business in the near future it is suggested that you do not let the 2008 recession be the cause of holding off till future years. We suggest that you start looking at were your business is now and what you can do to justifiably forecast a much higher revenue growth. Here are a few suggestions:
- Lock in long-term contracts that will be a safe bet on future cash flows. We also recommend that you maintain the contracts you currently have to ensure their renewal upon the end of the term. We recognize that this is not always possible but do your best.
- Build a business that is self-sustainable. Potential acquirers of your business are going to be put off if the company nearly falls apart every time you take a vacation. This fits very well with the concept of “getting the right people on the bus and the wrong people off.”
- Have a niche that differentiates your business from every other business in the market. It isn’t always easy to maintain such a competitive edge but those who find out how usually profit from it.
One company that was being represented lacked each of these three aspects and we found that they were very unattractive in the market. In this situation, unless you have a technology that marketable, selling your business may not always be such an easy task.