How can you prepare your company to avoid the possibility of a fire sale?
Timing is essential. According to Staffing Industry Reports it is vital to consider both the external economy and your firm's internal conditions when you are deciding whether to sell.
-
A softer economy like 2009 had an adverse effect on valuations. Many prospective sellers choose to hang on for a better day and have been rewarded with an improved economic environment in 2010. While some buyers are still stuck in 2009 fire sale valuation mode, there are still some realistic buyers in the market that see the improved results and want to benefit from your growth.
- Ensure that your financials are clean and clear and easy for potential buyers to read. Smaller firms (under $10 million) typically have compiled statements, unless their banks demand more. Ideally, these statements would include audited or reviewed financial statements such as income statements, a balance sheet, statement of cash flow, cash flow forecasts and pro forma income statements, supported by adequate notes to the financial statements.
-
Analyze the tax consequences of the sale. In a C corporation, if the owner sells the assets, money earned by the company is taxed twice: when it is earned and when it goes out to the shareholders. If an owner sells the stock of a C corporation, the money bypasses the company and goes directly to the owner; therefore, he/she only pay taxes once. In an S corporation, an LLC or an LLP, the owner can sell assets without the concern of double taxation. Canadian companies are all treated like "C" Corps.
These are some pointers gleaned from our experience and staffing industry reports, all of which can make a huge difference when the time comes to sell your staffing business.
Reply to this newsletter to let us know your thoughts or if you have any additional suggestions for staffing industry owners getting ready to sell their staffing business.
Contact Sam or Bob, who have successfully completed over 120 staffing industry transactions, if you'd like to discuss M & A matters related to your staffing firm.
|
