Selling a bar can be a challenging endeavor, as many bar owners are well aware. It involves several time-consuming steps that require careful consideration. While each business sale is distinct, they typically follow similar fundamental principles.
Bar owners can increase their chances of finding the right deal by taking proactive measures and being adequately prepared. By doing so, they can optimize their profits in the process.
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Getting Started
Planning to sell a business well in advance, ideally around two years ahead, is highly beneficial. This timeframe provides ample opportunity for the business owner to prepare for the sale and position themselves to secure the most favorable price. Maximizing profits when selling a business depends on various factors, including the timing of the sale. Considering the current economic climate and the uncertainty surrounding tax increases, it’s plausible that more business owners might opt to sell their businesses in 2023.
The present year presents an advantageous market for selling a bar due to the substantial demand and increased consumer spending. Therefore, bar owners looking to sell can capitalize on these favorable conditions to achieve a successful sale.
“Through my work at Empowered Equity Commercial Investments, I’ve seen people sell many bars over the past few years,” said Chris Hadley, founder of Empowered Equity. “When you want to sell your bar, bistro, pub, or any other type of establishment, there are a few key areas to focus on.”
Supply & Demand
“Over the past few years, the resilience of small business owners has been put to the test,” Hadley continued. As a result, the values of different businesses have risen since the pandemic. When demand and value for property are high, it’s a good time to consider selling.
Business owners the potential to command higher prices for their ventures. The timing of the sale plays a crucial role in ensuring a favorable outcome. The evolving landscape shaped by the pandemic and the ongoing economic recovery sets the stage for a promising year for sellers.
Accounting for Tax Consequences
Under the Biden administration, there is a potential for capital gains taxes to increase in the coming years. According to reports, a 39.6% capital gains bracket is being considered for taxpayers earning over one million dollars. The indexing of this bracket will account for inflation, which we are currently experiencing in 2023.
While most bar owners may not be significantly impacted by this change, those earning over one million dollars might be affected. Although Congress has not yet voted on any tax increases, it is prudent for business owners to consider the possibility of future tax changes when contemplating the sale of their business.
Labor Shortages
Over the past year, we’ve witnessed severe labor shortages affecting various industries, particularly the service industry. Bar owners have been grappling with these shortages and may need to devise plans to address the issue. However, the labor situation could serve as a significant factor to consider when contemplating the sale of a business in 2023. While some bar owners may choose to wait out the current situation, others might determine that it is an opportune time to sell their business.
Labor shortages have a detrimental impact on service industry businesses, often leading to temporary closures until adequate staff can be hired. Such disruptions result in income loss and can adversely affect the overall profitability of a business when it is put on the market. Weighing the potential loss in comparison to the profits that can be gained from a sale will help bar owners assess whether the current circumstances make it the right time to sell.
Leveraging the Market Advantage
Due to the prolonged period of pandemic-related uncertainty, many bar owners have opted to postpone their decision to sell their businesses. As a result, a market imbalance has emerged, with the demand from buyers surpassing the supply of available businesses. This situation has led to a continuous increase in sale prices, with buyers willing to pay a premium for these establishments. Presently, it is a seller’s market, offering advantageous conditions for those considering selling their bars in 2023.
Record-high prices are being achieved in business sales, and the demand from buyers continues to rise, creating a favorable environment for sellers to negotiate with the numerous interested parties seeking to purchase a business. As the economy steadily recovers, buyers are diversifying their interests across various industries and reopening sectors.
“Bar owners who are contemplating selling should explore their options,” Hadley stated. “Take time to determine the value of their business and initiate the selling process as soon as possible.”
Taking proactive steps in the current market can lead to favorable outcomes for sellers.
