With all the economy changes lately, the number one question we are hearing is how is inflation & the recession going to impact the sale of my business?
Ever Since 2020 it seems like the challenges are ever increasing from shutdowns to continuing supply chain issues to the latest inflation woes, the struggles for business owners across the board have been very real. And for those that are in the process of selling the most pressing question is now, “How is inflation going to impact my business and my ability to sell it?” The good news is you need not fret. Even though economically things may be a bit uncertain the sale of your business and it’s worth reside in much more than the current state of the economy.
The major players to consider here that are going to impact your business are rising prices, overhead expenses, and narrower profit margins.
The major players that are going to impact the sale of your business are going to be a bit different. Especially during an inflation. Top things to keep in mind:
1. Sell the Future
When you sell a business, you are not selling the past profits or even the current profits. Although having a great track history is always a boon. What you are selling when you sell a business you sell its future profits and potential. During an inflation driven economy, a higher margin business is most likely going to have no issues selling for more as inflation does little to impact their costs of business.
2. A Consistently Growing Business is Worth More
If any of the recent economic trends of inflation, labor shortages, supply chain issues have caused your business growth to slow or flatten out your financial gains it could adversely impact your originally predicted growth rate. Adversely, if your business growth has maintained steady through the years or even increased this could be an asset to the sale.
3. Positive Impacts of Inflation
There can also be some positive impacts on businesses that result from inflation.
- Increases profits due to raised prices. Especially if the business is able decrease the cost in one area by streamlining processes or to pass the increase on to the customer then their profits will increase.
- Encourages investment – When everybody is selling, buy. It is one of those strange time periods which can bring out some of the most avid and aggressive of investors. But the adage still rings true when everyone is selling buy.
- Increased Business Efficiency as they work to stay competitive in their space during tougher economic times.
- Reduction in debt burden as businesses work to offload high interest debt before feds raise rates more.
During Inflation and Recession Driven Economies it is important for business to make sure that their systems and processes are as efficient as possible to continue to drive profits and stay ahead of the competition. Know your numbers, know your competition, and know what you need to do to stay ahead. Smart investors are always going to be out there looking for a smart business opportunity regardless of the economic situation.
If you are still asking yourself how inflation and this recession are going to impact the sale of your business, we would be happy to talk with you about how to best navigate these waters. Email Us Anytime at Allen@PacificMergerGroup.com or Call Us at 469-569-8347.