The slump in the economy during the past couple of years has caused a great deal of anxiety for business owners, many of whom are unsure if they will be able to keep their company. Businesses across the country have had to close for good or sell their company for what would have previously been a pittance. But cash is tight, and many business owners who never envisioned selling their companies have been forced to take less-than-satisfying offers for their business.
How does a business owner know when it might be time to consider selling? How does he or she determine the lowest acceptable offer? Even if you aren’t expecting to sell your business anytime soon, it’s still important to think about how to exit the market if the need arises.
As an example, we’ll look at the transportation industry – companies selling ambulances, limousines, trucks, and so on. These companies are a good model for examining how to go about buying or selling a business.
With these transportation companies, we see something called the “80/20 rule” come into play. This tells us that about 80% of companies still in business are struggling to survive, while the remaining percentage of companies are taking advantage of competitors’ weaknesses by cutting deals with new clients and acquiring weaker companies.
If your company is among the 80% which are struggling, there are still ways to make the sale of your company palatable and acceptable. In fact, many sellers will exit the market with a significant return on investment (perhaps not as large as may have been the case a few years ago, but still hefty). The 20% of companies which are succeeding are more likely to be flexible in their offers and value your company higher depending on its potential for future growth. In all likelihood, the selling process will be long and drawn out, so patience is a virtue when it comes to the sale of a transportation business.
Sellers also have the option of hiring professional business brokers specializing in their particular industry. For instance, a business broker for transportation companies would be focused on implementing changes in the company to improve its value before putting it on the market. Because they deal with the market players frequently, business brokers usually have great connections and relationships with potential buyers. Hiring a business brokerage firm can improve the success of selling your business.
If you haven’t decided whether to sell your transportation business or remain the owner, it’s still a good idea to have frequent appraisals and business valuations so you’re strategy is up-to-date. You never know when the unexpected might happen and put you in the difficult position of putting your company on the market.