Portland Business Broker Thoughts

There are a variety of conditions that may indicate that it is a good time to contact a business broker to explore exit strategies. This blog post is part of a series about signs or indicators that it may be time to consider a business sale or exit.

Sign it is time to sell your business #5: you are unwilling to make capital expenditures necessary for growth

Many business owners get to a point in time where they don’t really want their business to grow – they are comfortable with its size and profitability.  Making capital expenditures to facilitate growth may necessitate using debt or putting more equity capital at risk, and some business owners may simply not want to do so, especially if they are considering exiting the business in a few years.  Yet a business that isn’t growing is, in effect, slowly dying.  If there are capacity problems where a business can’t meet the demands of their customer base, eventually they will likely lose those customers to a competitor who can satisfy that demand.  Failure to grow may also result in a loss of key employees.  If employees see their growth, advancement, and income potential being limited because of a perceived slow-down or stagnation of the business, they may decide to seek employment with a company where they will have greater advancement opportunities.  

However, it is not an illegitimate concern about whether to make capital expenditures or not if you are seeking to exit a business in the not-too-distant future.  Spending $100,000 on a piece of equipment that may lead to $20,000 in additional profitability per year may be a good decision for the business long-term, but in some cases it may not result in a dollar-for-dollar payback if the business were sold within a year or two.  

So if you have reached a point where you know your business needs to make some capital expenditures necessary for growth it may be wise to contact a business broker to discuss your situation.