When times are full of plenty, a business even without a healthy cash flow and marginal profitability can generally survive and scrape along. But, when the economy really sours, as it did from 2008 (and still hasn’t recovered yet), that’s when cash flow is impacted, account receivables get behind the curve and credit is almost impossible to secure from your friendly bank.
Let’s admit it, cash flow is king and the life blood of a business and companies that produce consistently high and growing levels of free cash flow are unlikely to go bankrupt. However, if the regular flow becomes erratic, then running your business now becomes a nerve wracking experience. Any business owner who’s been in this position, will attest to this situation being his/her number one fear.
Even with a superb rating, credit is dependent on good cash flow. The number one obligation of course is payroll and it goes down from there. Easy to hold a creditor or two off for an extra 30 days, but in most states the law won’t allow you to do that to your employees.
According to the U.S. Census Bureau more than 200,000 small businesses vanished between early 2008 and 2010 — a period covering the Great Recession and its immediate aftermath — taking with them in excess of 3 million jobs, according to Census figures which illustrate the depth of the country’s economic hole.
So, the take away moral of this story is to collect your AR as regular as clockwork, run a well oiled and efficient business in more of a frugal manner, and don’t get too complacent that it won’t happen again and not to you. History is full of cycles and it will happen again…but next time be prepared.
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As a small business owner, have you been waiting for the economy to turnaround before selling your business? If your answer is yes, now’s the time to start planning your transition as economic conditions improve. As bank lending eases and buyer liquidity improves, you’ll want to be ready to tap into the market and take advantage of being the early bird that catches the buyer.
Business Owner and Intermediaries
Buyers are Looking for Good Businesses
There are already indications that buyers are once again searching for their dream business, along with an increase in business owner’s inquiries wanting sell their businesses. In addition, the SBA has brought their lending rules back into the rational zone, which allows a greater number of potential buyers to take advantage of the eased lending environment.
Choose a Certified Business Intermediary
Another factor important to owners selling their business is availability of competent brokers. Unlike selling real estate, where density of real estate brokers and agents in major population centers is high, the density of qualified and certified business brokers across the nation are few in number. This is especially true since the banking crisis and economic impact in 2008. Consider this fact, there are only ten CBI’s (Certified Business Intermediaries) in New York State alone. Therefore, the supply and demand curve work against business owners delaying a decision to sell, since most of the qualified brokers will soon be pre-occupied once the economy finally takes off.
Worlds Largest Professional Brokerage Association
Given this state of affairs, the first question a business owner contemplating the sale of their business should ask a broker is, “are you a certified broker by the IBBA (International Business Brokers Association”. Certified IBBA Brokers have spent considerable time, effort and significant investment to ensure they meet the high standards required by their association to professionally serve business sellers and buyers alike. Very much like CPA’s (Certified Professional Accountants), a CBI has to continually sustain his/her certification with continuing education. This ensures that their clients interests are always catered to in a competent and effective manner.
Business Owners Take Action Now!
Don’t take chances, as a long time business owner with so much to lose, why use an unqualified broker to sell your business…go with an IBBA certified broker and get peace of mind.
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