The best time to sell is when everything is going great and has been going great. This is also the hardest time to sell. It is human nature to hang on for one more inning or one more season when the game is going well. After all the good times are well earned. This is the reward for the long days and the other sacrifices. If one has been in business long enough to have built a sellable and valuable enterprise, then one has seen the ups and downs of forces beyond one’s control. Those forces have been overcome in the past but it took time and talent to do that. The talent is still there and probably better than ever, but is the time still there?
Valuations are a key starting point to any negotiation to sell or to buy a business. The Seller has a valuation and the Buyer has a valuation which represent the expectations of each party..
Valuations are always opinions and are often presented by outside parties engaged by the Buyer and/or by the Seller of the potential transaction. Often those outside parties neither offer nor represent Buyers or Sellers able to bring those valuations to reality.
Based on a variety of formulas, those valuations become respectively the expectations of the Seller and of the Buyer. However those formulas are generalizations and each Seller’s business and each potential Buyer are unique. Accordingly expectations do not always align. This could be because the Seller or the Buyer does not fully understand the value of the potential transaction
Stoney Point LLC works to bring the respective parties into alignment. This is done by presenting the clearest possible representation of the present value and future potential of what is for sale to the Buyer in their terms. And by providing the Seller all of the appropriate information so that Seller’s expectations are aligned with the current marketplace. Both parties will evaluate the proposed value of the transaction in their terms as to how it may contribute to their separate goals.
The only true and absolute valuation of an individual transaction is that which is agreed to by a willing Seller and a willing Buyer. Independent agents may offer transaction valuations using a variety of tools but it is up to the Buyer and to the Seller to make the final determination. A successful transaction is always based on a compromise between Buyer and Seller. While there may be a small element of mutual dissatisfaction, there is always a greater element of mutual satisfaction in a finalized transaction. Stoney Point LLC will help all parties reach that conclusion to the best possible advantage of the party we represent.
To “C” or not to “C”
The new 2018 Tax Reform Act has many favorable changes for the small to medium size privately held business. One of those changes is a significant reduction in the tax rate for “C” corporations. There may be other possible advantages for a change to a “C” corporation in the form of deductions. These changes may prompt business entities now IRS classified as “pass through” (LLC or Sub S) entities to consider changing to a “C” corporation.
If you are considering the possible sale or transfer of the ownership of your closely held or solely owned business within the next 5 years, you should consult with your financial and legal advisers regarding the impact that conversion from a “pass through” (LLC or Sub S) to a “C” entity may have regarding the future valuation of your company and the restrictions on changing back from a “C” entity to a “pass through” (LLC or Sub S) entity to reverse those effects .
Why sell or why buy now?
The best time to sell or to buy is when things are going well.
The toughest thing for business owners to do is to sell when things are going well. Think of the professional athletes that have quit while they were on top and think of those that have stayed in the game too long.
Buyers also want a company that has a solid track record. Yes, there are buyers that are interested in companies that have problems, but they want a discount for their future efforts to right the ship.