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Overcoming Declining Revenue Trends When Selling
While it is common for business owners to feel emotionally fatigued and ready to move on by the time they finally put the business up for sale, it is important that they stay engaged during the entire sale process and not turn away from the day-to-day operations of the business.
Why? The tell-tale declining revenue trend is a lurking danger that usually strikes when the owner is not looking.
In order to get the best price possible for the business stay in growth mode, not retirement mode. Don't let the business slip or fade. Keep normal hours, maintain inventory levels, and continue marketing efforts as usual until the business is sold.
If, however, an owner is in the circumstance of having to sell at a time when sales have been waning, a well-defined explanation of the reasons for the declining revenue trend may mitigate the impact on the ultimate price paid for the business.
The following are things that can be done to showcase the positives, overcome the negatives, and increase the probability of achieving the sale of a downward trending business.
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National Survey Reveals that 2011 Likely to be a Stronger Year for Selling a Business 
BizBuySell.com, the Internet's largest marketplace for buying or selling a small business, released survey results showing that business owners who have been hesitant to sell may want to consider preparing their business for sale in 2011.
76% of responding brokers nationwide anticipate that 2011 will be a good year to sell. A generally positive feeling about economic recovery seems to be the driving factor for the encouraging reports about the business-for-sale market this year. More than two thirds of the brokers - 69% - who anticipate that this year will be a good year to sell a business cite "the economy in general is starting to recover" as driving their bullish outlook. Other top reasons for optimism cited by brokers include "more businesses coming on the market" and "better financing becoming available for business buyers."
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Ask The Experts - Question from our Audience
Q: I did a radio spot last year that did not produce results. Would this expense be considered as a possible "addback" when valuing my business?
A: The short answer to your specific question is yes. A marketing or advertising effort that was a one-time event that did not produce corresponding revenue, then yes, this expense can be considered as an "addback" since a new owner would not incur the one-time expense.
Let's consider the same one-time radio ad that cost you $50K and you got one job as a result of the ad. The profit from that job was $10K. In this situation, one might make the case for adding back $40K, which is your cost less your profit.
Most situations are not cut and dried. Every circumstance has its nuances and each would be evaluated based on its particular details. All addbacks must be reasonably supported because buyers will be looking closely and judging the legitimacy of each.
Read more about addbacks in "Recasting Financials." |
