Burying excessive personal expenses in the business financials can lower business value!
The most popular method of valuing a business uses a multiple of earnings over a period of years. Business owners should be aware of that while attempting to reduce the bottom line with personal expenses to minimize taxes. Though there are a number of deductions that may be added back to determine true ash flow, not all add-backs are considered legitimate by buyers or lenders. Being too aggressive in minimizing taxes today may cost a business owner big dollars at closing.
Some businesses may need a whole new direction!
Unfortunately, there are businesses whose market has changed so drastically that their products or services how have limited demand. And it might not be the slow economy! Those business owners may have to consider a whole new business model and get into the research and creative thinking mode. A good starting point is searching ideas on the internet.
“You can’t always get what you want”
The title to the 1969 song by the Rolling Stones seems to echo what the market is telling many business owners these days. There is no question that prices for many businesses are down and for various reasons. But if there are offers on the table a business owner must take a hard look and be realistic as to what has to change, the business or the economy for the price to “sing along” with expectations.
Leases can make or break the sale of a business
The lease terms of the business space can be a major consideration for a buyer. For example, a retail business with a long term lease on a good location can be attractive. But a long term lease on a business needing more space to grow could be a detriment. Or there can be concerns for an expiring lease when the landlord might demand a large increase. When it comes to negotiating a new lease, business owners must carefully think through the timing of their plans for exiting their business.
These tips are courtesy of Bill Sivell, VR Windsor. Please contact him for additional information on how to amximize the value of your business. www.vrwindsor.com
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