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Are small businesses that have had high profit but have fallen into debt marketable?

My brother owns a high-end patio furniture company. During the boom the company was very profitable; however, the last few years the company has fallen into debt of around $200,000. His partner is optimistic they will dig themselves out, but there is no business plan to support this only the status quo of my brother working around the clock with no vacation. He has put his blood, sweat and tears into this business and it is he who has the contacts and generates the revenue. Is he best to cut his losses and walk away or pursue selling?
Thank you.
-Concerned Sister

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Answers (3)
Troy Frank
VR Business Brokers / Mergers & Acquisit
IN
Premium Broker

I have found that profitability prior to the economic troubles has little impact on today's business buyers. It is certainly a "what have you done for me lately" mentality. Trying to sell the business now would most likely result in only the liquidation value of the assets. If there is a reasonable opportunity to turn the business around, I would recommend trying to hang onto it until the numbers improve.

Jan 22, 2010
Jon Holmquist
Edgemaster Model 400 sharpener
President
Marion County, OR

Hello Lacy, there are a lot of questions you need to answer about the business. Are there any assets, like real estate, inventory, equipment, fixtures, buildings. Does your brother stand to lose his home or other property if the business goes down the tube? Are there potential sales that are waiting to be filled or accounts receivable that are collectable or not? If he is just working to keep busy, then he can walk. If he stands to lose a lot, then he should look at an investor to help him put the business back together over the next 5 years or so. Good luck Jon at Edgemaster

Jan 11, 2010
Jon Holmquist
Edgemaster Model 400 sharpener
President
Marion County, OR

Lacy, are there any assets, real estate, potential sales, accounts receivable or is he a bankruptcy in waiting. If there is something to sell and potential is there, it might sell. If there assets to lose, such as a home pledged, business fixtures, machinery, etc. you might find a buyer who can see a way out.
You may get a person willing to join in for a percentage of future potential. Good luck Jon at Edgemaster Mobile Sharpening

Jan 11, 2010

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