I’ve had the privilege recently of being invited to help a family through a very difficult time. The controlling owner and manager of a 15-employee business recently passed away. His brother and a few friends and minority shareholders have stepped in to manage the business until it can be sold. Unfortunately, the business is not performing well. The economy, and no doubt the passing of the owner-manager, has taken a serious toll on revenue and profits.
I’ve analyzed the financials and assessed the situation in great detail. The very brightest of the few bright spots is the business owns the real estate it occupies. Its value, though down, has declined far less than the business. Of course, this is what one might expect as real estate values are much less volatile than businesses values.
Because historical profits have been slim, revenue is down sharply and the business is currently losing significant amounts of money, the business has very little value. It can be sold but there will be little money, if any, left over after the businesses’ debts are paid. Still, there’s a bright spot.
The buyer of the business will rent the facility and therein provide an income stream to the widow and, to a lesser degree, the minority owners of the business.
Business owners should seriously consider doing all they can to own the real estate the business occupies. It’s always important to “buy right,” but it can provide meaningful financial diversification. It can also provide stability; in terms of control over your location.
This article was written by the experts at The Business Owner. If you are the owner of a private business, go to www.TheBusinessOwner.com or call us at (800) 634-0605 for more no-nonsense how-to information.
