Buying A Closed Business & Selling A Closed Business
Now might be an opportune time to buy a closed business. Or, if you are a business owner who recently closed your business, now might be the best time to sell your company.
Below is a breakdown of information around buying and selling closed businesses. The risks and opportunities in this specific market are massive.
The Risks & Opportunities Of Buying A Closed Business
Buying a closed business can be comparable to buying a house at an auction. You can purchase a great house, or a terrible house all for a really low price. Understand the risks and rewards of buying a closed business.
Opportunities In Buying A Closed Business
When buying a close business, there are a lot of opportunities. Certain challenges change, well the cost of the business is lowered. Here are a few factors or opportunities to consider when buying a business:
- Lower Sales Price: Because the business has been closed, it had less income for a time and will be listed for sale at a lower price. Businesses that have been closed can sometimes take longer to sell so their price can drop over time.
- Easier Transition: It can be easier to transition into a business that has been closed because the owner has not been managing the business and you are taking over their role as the business owner.
- No Employee Difficulties: If the business is closed, then it probably does not have many employees. Sometimes there can be difficulties with employees when buying a new business. In this situation, you will be hiring the employees yourself and have the opportunity to make the business reflect your work ethic and values more effectively.
- Situational Opportunity: Due to the business being closed you have a situational opportunity when you take over the business. Using it as a PR stunt, you can highlight the history and good parts of the business (past relationships, online presence, and public perception) while also downplaying anything the business did poorly in the past. This can get inertia behind your business.
Risks To Buying A Closed Business
There are always risks in buying a closed business. Why is it closed in the first place? Will it be able to resurface and create the return on the initial investment? Below are a few of the risks when purchasing a business that has been closed:
- Inability To Gain Inertia: Starting a race from a sitting position is difficult. Starting a business that has already closed down can be difficult too. Make sure you know as much as you can about the business’s situation before purchasing. This way you can make sure you can make a profit from the business.
- Unknown Status Of The Business: When a business is closed for a large amount of time there are a lot of unknowns and a lot of things that can fall through the cracks. Make sure the closed business you purchase is up to date on licenses and insurance. You do not want the materials and tools you just purchased to have gone bad or break while the business was closed.
Can I Sell My Closed Business
Recently a large number of businesses have remained closed due to the 2020 shutdown. Many businesses were unable to open their doors again. Business owners are struggling to hire employees and to get their business functioning as it did before Covid-19.
A lot of owners are considering selling their closed businesses. You may be considering selling your closed business. It is possible to sell a business that has been closed for a while, but there are a few things to consider.
Factors In Selling Your Shutdown Business
As you look at the economy, and the challenges of owning a business today, selling your business seems like the only option. While selling your business might be the clearest route, there are a few negative factors to selling your business while it is closed.
- More Difficult To Sell A Closed Business: It is much more difficult to sell a closed business. When you sell your closed business, the same problems and difficulties that are keeping the business closed will get passed on to the buyer.
- Lower Valuation Of Your Closed Business: A lack of business income will have a negative impact on your business’s valuation. Your business’s valuation will also depend on the length of time your business is closed. If your business is not able to produce revenue, it is worth less. If your business reopens and is able to produce the same amount of revenue it used to, your business’s value will return.
- Longer Amount Of Time To Sell: A lot of buyers will look for functioning businesses to purchase. If your business doesn’t show signs of life, then fewer buyers would be interested.
Business Valuation After Covid-19
The value of many businesses dropped due to COVID-19. With many businesses being closed for a large enough time in 2020, their annual revenues decreased drastically. Your business’s annual revenue is used to calculate your business’s value. Since your business was closed due to state and federal mandates, the loss in revenue isn’t your fault.
Trying to value a business based on 2020’s income is now a challenge. Luckily your business isn’t the only one to have experienced COVID-19. Many fires are understanding about declined revenues in 2020. 2021 annual revenues will play a major role in determining your business’s valuation and status after the water settles. If your business remains closed it may be more difficult to sell.
Other Ways To Sell Your Closed Business
This might be a situation where you would want to liquidate your business. In most scenarios, you will make more money selling your business than liquidating it. In a scenario where your business is closed, you should consider liquidating.
Liquidating your business is a process where you sell all of your business assets. This will be time-consuming and slow but it might be your only option if you’re business has been closed for a long time. When liquidating your business be sure to have an accountant.
Sell Your Business At Synergy Business Brokers
At Synergy Business Brokers we sell businesses that have annual incomes of $700,000 to 70 million or more. If your business might fall within that range, contact us today. We work with a variety of industries and have years of experience to sell your specific business.