"How small-business owners manage this process (retiring from or exiting the business) is going to have a tremendous impact on their ultimate level of wealth. But making the decision may seem less overwhelming if you see it through the lens of the old Wall Street ratings systems: sell, hold or buy."
The credit crunch is hitting business owners on many levels, including one they may not have seen coming. According to the New York Times, many small business owners who had hoped to sell their businesses and retire on the proceeds are finding their plans must be delayed, if not abandoned. The problem is not so much that their businesses have lost value, but rather that banks are reluctant to lend money to prospective buyers.
There are options, but business owners need a well-reasoned approach to sift through them. Using the old Wall Street ratings system, consider whether it would be best to
· Sell Now - perhaps taking less money, but enjoying a currently low capital gains tax rate;
· Hold Now - run the business for a few more years and let the economy recover, but be careful you don’t “take your foot off the gas” and let your business slide (and devalue); or
· Buy Now – invest in the business, or find investors to provide the financing for a sale.
To learn more about business succession and exit planning, visit the Business Succession Planning Center on our website.
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