So, are you thinking of selling your business in 2021? It seems like this is a trend very much worth considering. And that makes sense to me. Why? I can think of four really good reasons.
- Supply vs Demand. Every day 10,000 Baby Boomers turn 65 and more than 30% own a business. By 2040 assuming the system has not gone bankrupt, Tiger Woods will all be able to collect social security and George Clooney will be 79. Now think: Suppose you would like to sell your business someday. Will it be easier to sell in 2021 when there will be fewer gray business owners prepping to exit sooner rather than later before a glut of metal shops, accounting firms and pizza shops started back in the good old days come up for sale?
- Post COVID Buyer Benefits. Today’s low interest rates indicate that there has never been a better time to sell your business too. Why? Because, for investors, there’s never been a better time to borrow money and buy appreciable assets… like your little business. How about getting an SBA loan for next to nothing (10% down payment) and getting 3 months of payment forgiveness and using that money to buy a company that could, if managed properly, return double digit profits? If your company falls into that category, then now is a great time to offer it up to a hungry buyer looking for an opportunity.
- Low inflation. Ten-year moving average of inflation has been 2.46% and our most current annualized inflation rate, according to the Bureau of Labor Statistics, is 1.47%. Only the New York Mets team batting average is lower. Rates are so low it’s almost criminal to put money into a savings account. Investors and buyers are desperate to find places to park their money where they can still get a decent rate of return. But where else? Right! Your business! With borrowing rates so cheap and the options for making money elsewhere limited, how about investing in a nice little company like yours? It’s a good pitch to make to a potential buyer I think you’d agree.
- Low Taxes. Our capital gains tax rates range from 15% to 20% but these rates are still significantly lower than what prevailed from between 1936 (40%) through the mid 1990’s (28%). This means that if you sell your business now the tax rate on the capital gain you’ll likely realize is at an historically low level. Now, turn on the TV and watch what’s going on in D.C. Already you’ve started hearing more rumblings about increasing taxes (like capital gains) on those dirty, rotten, business owners. Hey… that’s you! And further increasing the tax on capital gains remains on Washington’s agenda as just one of the dastardly ways they’re considering of cutting our deficits by attacking us dastardly wealthy people. With taxes at such relative low levels, what better time is it to consider selling?
These are 4 good reasons why you should consider selling your business sometime soon. I know you may have emotional ties holding you back. It’s your baby. You built it from scratch. But the smart businesspeople I know look at their companies as nothing more than assets. I know this sounds a little cold, but it’s just the truth. And anyone who knows anything about business knows that you buy low and sell high. And now just may be that selling-high time.
Please contact me and we’ll do a complimentary valuation to see what your business is worth. After all, shouldn’t you know what its worth whether or not you decide to sell?