We know you are busy running a business and do not have time to monitor everything that is happening. So to make things easier for you, we have compiled a brief report on the last year’s business sales, the current economic climate and some tips to help you maximize the value of your business to assure that you maximize all your hard work and get the highest price when do you do go to sell your business.
STATS FOR 2016
Most businesses are valued based on a multiple of the adjusted net profit. For 2016, in Nassau, Clay, St Johns, and Duval County, the average net profit was multiple of 2.3. This is significantly higher than what we have seen in years before (typically it has been 2.0). The average number of days to sell a business was just a little over 6 months, down from 10 months previously, the lowest we have seen in 7 years. Overall the small business sales have been booming!
CURRENT ECONOMIC CLIMATE
We have not seem this healthy of a business selling environment since 2006. All indicators say 2017 will continue to be a great business selling cycle. The next recession is predicted for 2018 – 2019. If you are looking to sell, now is the time before a change in the economy.
SUGGESTIONS TO MAXIMIZE THE VALUE OF YOUR BUSINESS
We know you have worked hard to build your business. You have put endless hours into your business, made many sacrifices and potentially bet your future on the sale of your business. To help you get the most out of selling your business, when you are ready, here are 4 tips:
- Clean up your P&L. Before you submit your financials to your CPA to do your taxes REMOVE all the NON BUSINESS expenses. Banks require 3 “good” years of financials for lending. Unless you want to be the bank (i.e. hold a large seller note), it is far better to pay the taxes and let the bank finance 75% of the price of the business instead of you financing the business.
- Decide if you will sell now or wait 7-10 years. The economic cycle is in the seller’s best interest every 7-10 years. We are approaching the end of this cycle. The next cycle will favor the buyer for a period of time before shifting back to the seller. During a buyer’s market (aka recession / downturn), you will get the lowest price and will have to potentially hold a large seller note since banks are as freely lending during a downtown. Will you sell now or wait?
- Meet with a broker sooner than later. I offer a complimentary consultations to review your business exit plan (or help you create one) to help you maximize your business value and can spot items that are devaluing your business and help you fix them BEFORE you are ready to sell.
- Get your business valued. If your business is over $1M in sales, you will want to get your business valued. A business broker can estimate the value but since every business is unique, your business may need a more detailed methodology to establish the real value of the business. By getting a valuation, you will know the real value and buyers tend to pay closer to the appraised value when they see a valuation has been done. We offer valuations starting at $3000 (locally they run about $5000).
If this your year to sell your business, call us so that we can talk about the next steps. All conversations are confidential and we do more than what is expected to exceed your expectations to keep the American dream alive in Jacksonville.
Here’s to a great 2017 and beyond!!!