Is this the right time to set a price for your retail business? A topical commentary on CNN noted that median asking prices for small businesses in the first quarter of 2009 was $250,000, but the average sale price was $165,500.
Sellers used to base their initial price on three years of a store's financials.
That was a guide to agree on how much cash the business would generate in the coming years. However, that formula is not working in this economy. Up to date pricing is increasingly derived from revenues and cash flow, which are very low now because of the recession.
If income from selling your business is your retirement security, it may be time for you to think about putting off retirement for a few years while waiting for revenues to increase.
Another dynamic is that with unemployment at historically high levels, prospective buyers who are looking for immediate cash flow to cover their living expenses aren't going to buy based on a shop's future earning potential. Buyer interest is up, but many don't have the capital they had only a year ago. Also, the availability of capital from banks and other lenders is unusually difficult.
The recession is beating up business sectors across the board, and industry gurus don't forsee prospects for retail business getting better any time in the near future.
As an alternative to selling, retail business owners may want to consider opening a second business, in a different industry than what they are operating in now. It is viable to create sizeable income without encumbering debt to initiate a new venture.
One such prospect exists in a new cyberspace business model. It has helped many current and former owners of brick-and-mortar businesses (including the author of this article) to start over in a new industry devoid of the drawbacks of inventory, overhead, hires and location which dragged down their previous retail stores.
For an initial cost which is less than the cost of an average new automobile, business owners have transitioned into a new venture which has the possibility of providing retirement funds, and allowed them the option of waiting to sell their retail businesses or liquidating and full time attention to their new online venture.
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Bruce Wood is an artist and entrepreneur who has owned many conventional companiesincluding a chain of home furnishing stores in the Chicago Area and a commodity futures advisory service. He is now an online business owner. An introduction to the new internet business model he now uses is at BruceWood.net
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