A recent opinion poll conducted by BizBuySell revealed 84 percent of small-business owners anticipate their businesses to perform better in 2018 compared to 2017. Could this be due to the Tax Cuts and Jobs Act passed in 2017? The Tax Cuts and Jobs Act aims to spur economic growth by adjusting tax structures for small businesses and corporations. Under the new tax law, small-business owners benefit from a 20 percent reduction for qualified business income. The thought behind the reform is that small business owners would reinvest the savings into their business and their employees.
While it’s still too early to tell, early indications show that many business owners plan to invest those savings back into their business, reflecting a sense of optimism for the future. Reinvesting in the form of staffing, increasing salaries, investing in marketing and making capital improvements, all have an impact on the value of the business. As business owners confidence grows and they possess the resources to make their businesses more efficient, the result could reflect an increase in small businesses changing hands. For business owners looking to sell a business, Corporate Investment Business Brokers’ qualified professionals can help navigate the selling process.
A variety of reasons fueling the possibility of more business sales include:
- Sellers ready to exit the business – As the retiring trend continues baby boomers are taking advantage of the market conditions to sell their business. Especially those business owners that rode out the recession waiting for the value of the business to increase to a level that would support retirement. In an effort to take advantage of the perceived benefit the tax reform will provide, business owners will want to sell their businesses now, rather than wait for the actual outcome, which could be a disappointment.
- More desirable businesses – Investments put back into a business will make it more appealing in the long run. Things such as investing in equipment, improvements in appearance and increasing staff to improve operations efficiencies help boost the value of the business. While potential buyers are interested in a business’ revenue history, they also will evaluate how well a business is positioned for continued success. Business owners reinvesting with capital improvements will receive a higher value for their business and find more qualified buyers.
- An increase in customers – The Tax Cuts and Jobs Act also includes a decrease in the corporate tax rate. Corporate entities can use their tax savings to invest in small businesses or hire them for short-term projects. The new tax rate of 21 percent frees up more capital for enterprises to engage with more small businesses, leads to the potential of more acquisitions and boosts small business revenue.
Another important thing to note is the impact the tax cuts have on economic policy. Since 2018, the Federal Reserve Bank has kept interest rates low to encourage businesses to borrow money. This was the first major overhaul in nearly 30 years. For small businesses, these cuts are beneficial. An increase in tax savings and low interest rates along with a thriving economy can lead to a number of opportunities for small business owners.
Corporate Investment Business Brokers has the experience and expertise to help you. Please contact us for a free consultation. Call (239) 936-1718.