Around the Web: A Week in Summary
A recent article from Crain’s Detroit Business entitled “It’s a Sellers’ Market for Deals as Buyers Bid Up Business Values” discusses the increasing gap between supply and demand for businesses available for sale.
For many business owners, having made it through the recession and seeing promising trends in their current profits is a deterrent from selling their business. Other concerns such as where to invest profits made from a sale as well as losing control of legacy increase skepticism in regards to the large decision. Despite these factors, experts encourage business owners to reconsider selling because the market is lopsided with greater demand than supply. With more people looking to buy than to sell and a market decline on the foreseeable horizon, it’s a prime time to make the sale.
A recent article from Business.com entitled “How to Determine What Type of Business You Should Buy” walks the reader through four crucial things to consider before purchasing a business.
“With 29.6 million small businesses in the U.S., your options for business ownership are endless.” Therefore, it’s important to:
- Start with what you know. By sticking to an industry that you have previous knowledge in you can save yourself a lot of work and set your new acquisition up for success.
- Follow your passion. It can be harmful to your business if you don’t absolutely love your product and disparaging for you if you’re bored. Choose an industry that excites you and your business will thank you for it.
- Narrow down the business model. There are many choices to be made about how you’re going to run your business. Do your research and intentionally create a model that feels best for you.
- Don’t skimp on research. “Nineteen percent of small businesses fail because they are outcompeted, and 42 percent fail because there isn’t a market need for their products or services.” Having a clear idea of the market you’re entering is crucial for success.
A recent article from The Denver Post entitled “Ignoring Tax Issues Before Deal is Struck a Big Mistake” evaluates the factors a potential seller should absolutely consider before accepting an offer.
Taxes can be very complex and overlooking them can cause substantial difficulties or losses when selling your business. A seller needs to consider the type of entity they use to conduct their business, if a tax-free/deferred deal is possible, if assets or stock are to be sold, potential state and local tax issues, and more. For these reasons, the author urges sellers to refrain from entering any substantive negotiations with a buyer without first consulting a tax adviser.