Ask any employee of an established small or medium sized family business what they would do if the owner closed down and then decide on your next step very carefully.
In my experience, owners of smaller businesses typically with $1- $3 million in annual sales generally have 10-20 employees. Theses smaller companies, many of which have been running successfully for 30 years or more, are seriously considering shutting down and each one will be putting 10-20 families at risk.
All you will accomplish with the proposed tax plan is to give them no choice and a convenient excuse to do so.
What we should be doing as a responsible community, is to find ways to keep their doors open. We need them to grow their companies, hire more people and successfully transition the business to new younger owners.
You are running down a dead end road and nobody will benefit.
Finally, you have forgotten that you work for us. This is not a dictatorship. The boomer aged owners of established businesses built this country over the past 5 decades. My guess is they will not let you destroy all their hard work.
Your pledge during the election was to tax the 1%. Success in small businesses comes from saying what you do and doing what you say.
Advocate for family businesses, Eric Gilboord
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I will consider all serious requests for writing, interviews or speaking engagements to discuss this subject in more detail.
NOTE: My subject matter expertise is NOT financial matters. I will speak or write on the impact of this proposed legislation on business owners and employees.
Thank you, Eric Gilboord
It's not necessarily a bad thing if you're doing what you love. Work the hours you want and make the money that affords you the life you desire.
This is commonly considered a lifestyle business. The Owner grows the company only as far as he/she is comfortable managing. Typically, but not aways, lifestyle companies do under $3 million in annual sales. That doesn't mean they couldn't do significantly more, just that the Owner(s) have chosen not to.
What Owners Think
When it comes to selling, they have an idea of how much more cash can be taken out of the business and what they think it could sell for. Owners think they'll stay around for a little while and that should be all the new Owner needs to transition the company.
What Buyers Think
To a Buyer this is considered a lifestyle business and a risky investment. The big question they will be asking is this. Can the business survive or thrive without the Owner? The Buyers are thinking, what if the Owner gets hit by a bus or gets sick or just quits?
Need To Do
What Owners must do is make sure the business runs without them.
More To Do
What else can an Owner do to evolve beyond the lifestyle stigma? Execute on the ideas placed on the back burner. Look into buying one or more of their competitors. Provide incentives for staff to help with the growth plan.
Mostly because none of us really know how much is needed to live out our life in real comfort. When you think beyond your immediate requirements, the needs of parents (senior care and medical bills etc.) children and grandchildren enter into the mix. Who knows what our government will do to make things even more difficult. How much is needed to retire? I don't believe anybody really knows and erring on the side of more is not a bad idea.
Sell for More
For Owners of companies, with annual sales, in the $3 million and under range; which is the bulk of small business, this is what what you might want to consider. As you run things now, you will likely be able to sell for 3-4 x ebitda. While that can be a considerable amount of money to supplement your retirement fund it isn't the whole enchilada.
What Both Want
Buyers are typically looking for companies with at least $10 million in annual sales. If you can grow your business to over $10 million in annual sales organically or via acquisition and increase the value by improving each of the departments you may be able to sell for possibly 6-7 x an even bigger ebitda.
I don't know about you, but that's life changing money to me and my friends.
So what are you going to do? Sell at the size and operating style you are currently or put some energy into the company and go out on an amazing high.
Out of Steam
I get calls regularly from Owners who know what needs to be done to go big. They just don't have any steam left or are simply using their steam with caution. At WarrenBDC we can help shape and execute the vision you have while supplementing the team you require to reach your goal.
What you thought were your only choices for selling are actually much more exciting than you had ever imagined. How about a partial sale? Where you can be part of the future, but only doing the things you love to do.
If you're up for the challenge, email me at email@example.com to schedule a call and let's talk about going out big.
Make every day count, take action now, Eric