We’ve seen the trends for several months, and now the reports confirm it: economic conditions have changed, and the future is uncertain.
The Consumer Price Index in June grew more than it has since 1981, and the Federal Reserve raised rates by 0.75% in June and July. That makes four rate hikes in 2022 and the largest change in decades. Finally, early data suggests the economy has contracted for two consecutive quarters, which means we’re technically in a recession.
So, it’s natural for business owners to ask, “what does this mean for the value of my company or the timing of my retirement?”
There isn’t a single answer because value depends on the company’s current trends and projected future in light of the economy. But in uncertain times, companies usually fall into three broad categories:
- Companies whose current revenues or profits are declining due to the economic changes. The value of these companies will decrease (at least temporarily), but the significance and duration of the loss can be mitigated by making the right moves.
- Companies that remain stable or even improve. These companies usually become more valuable – both because their trends are attractive and because the supply-and-demand dynamics work in their favor since there are fewer attractive sellers.
- Companies that are unaffected thus far but have a less certain future. The selling process typically takes 6-12 months, so companies in this situation probably shouldn’t start the process now, but it’s a great time to build future value – especially if you know where the leverage points are.
ASG has been supporting business owners for almost 40 years. You don’t achieve that kind of longevity by “convincing” business owners to sell but by giving them sound advice and helping them increase their value in all kinds of economic conditions.
If you’d like to learn more about the current value of your company, or how to increase it, we’d be happy to chat with you. Please contact us.
