Reason 1 why NOW may be the best time to sell
Taxes on a sale are low now, but soon will be much higher
Whether you’re a Republican or a Democrat, like it or not, one thing is almost certain; taxes are going up, way up, in the next few years. President Obama has clearly stated his desire to raise taxes on upper income Americans and politicians in all levels of government are looking for ways to increase revenue. Increased taxes on the rich are a sure thing in the next year or so. If you are close to retirement or think you may want to sell your alarm company or accounts anytime in the next 10 years, you need to take a close look at your options now. You may think that only the rich “fat cats” will be affected, but think again. In the year that you sell, you will probably be one of those “fat cats.”
Federal tax rates are at historically low levels but are already scheduled to rise next year. “Tax the Rich” is becoming a popular cry. What does it all mean to you, especially if you’re not really ready to sell out? You need to reconsider your plans for the next 10 years. If they include continuing to build your company for a few more years and then selling, you may want to take another look. Talk to your tax advisor and compare what you might realize from a sale now at today’s low tax rates to what you might realize later from your potentially larger account base but with a higher tax rate. You may well find that there is nothing to be gained from waiting and, quite possibly, the return later would be less than today. This may also be a good time to be looking to your financial advisors for alternate investment vehicles for the proceeds from a sale. Again the potential returns could be far greater than continuing to build your company and account base for sale later.
Also consider the potential impact of more and more companies trying to sell their accounts as they all begin to realize the impact of the looming tax increases. Supply and demand dictates that a surplus of available accounts for sale will tend to drive multiples lower as buyers have more opportunities from which to choose. Remember also, the potential for a sweeping technological change that may adversely affect account multiples and values. Finally, don’t let the unexpected happen to you. Multiples are currently high, perhaps not at record levels, but still pretty good and not likely to go any higher for a long time.