The market has experienced one of the most sudden and, for some, catastrophic economic declines in our history. There is no shame in feeling a little bit like you are between a rock and a hard place – having to decide whether to possibly close a business or sell a business. The important fact is, this is not a reflection of you, your work ethic, professionalism, or entrepreneurship. In fact, although not easy to accept, reaching this crossroads shows you understand the ebbs and flows of running a business. You are great – and closing or selling your current business opens up an endless list of future possibilities. For now, let us focus on what your next steps should be.
Should I sell or should I close?
In our professional opinion, it is always best to sell, rather than close. But, you might be asking yourself, can I sell my closed business? The answer is yes!
First of all, it is important to stress that if you decide to close a business, this means you are more than likely not going to get full value for all of your business assets. In the situation where your business is very small and does not have extensive assets or equipment, you can seriously consider closing – however, you can still sell. And you should consider that option as well.
In many cases – especially with an experienced broker supporting you, you can find an investor who is willing to take the risk on a declining business. In this scenario, the importance is to present your business in the best possible light – outlining its potential and successes pre-pandemic.
What is my business worth in decline?
It is really easy, and understandable, to be pessimistic during this season. Did rent prices get so high you had to lose your storefront? If this is you, it might feel like there is no business to sell – especially if the location was much of your business’s appeal. Do not fret. You can still offer your company’s goodwill, loyal client list, inventory, and market share. Think about it – a competitor might be looking to expand, and could be very interested in starting by absorbing your business.
This is exactly what one does if their business has already closed. When there is no “business” to sell, there are still certainly assets that can be appealing to the right buyer. This is called the transfer method or “asset sale.” A skilled business broker will be able to find a potential buyer looking for exactly that. They will be able to assist in the business valuation, listing, and negotiation process to get this business off your hands. This is an exit route that can be very appealing to business owners looking to minimize their losses as they prepare for a new opportunity.
I want to sell – What now?
Once you decide to sell your business, the first step is to hire a knowledgeable business broker familiar with your market. Whether you are near closing your business or need to sell before that inevitable fate arrives, a business broker can help you decide which option is best for your specific situation. An experienced business advisor should already be familiar with the current state of the market in your area as well as understand your industry and possibly have contacts they can reach out to. They will help you determine the value of your business and make recommendations for the next step. Nevertheless, there is always the option to sell your assets.
Contact your Transworld Business Advisors office today! We have business brokers with the expertise you can rely on in the East TN Market.