This article are provided for information purposes only, and are not intended as legal advice.


Selling a business – should you panic because interest rates are increasing?

April 27th, 2010

In Canada, mortgage rates are starting to increase.  HST is just around the corner being implemented in Ontario and British Columbia on July 1, what will be the impact of these changes?  At the moment no one knows.  I just spoke to a franchiser of lower end restaurants this morning and they are worried that these two items will impact their business.  Will it affect yours?  What happens if you want to sell in the near future, will that impact your selling price of your business for sale?

 

There are many items going on in the world at the moment, Greece is in trouble which is causing the euro to drop compared to the Canadian and US dollar.  If you have a business which imports goods from Europe, your profit margins are increasing if you do not change the selling price of your goods.  If you are buying from the US and your business is in Canada, goods are cheaper however if you are selling to the US, your goods just got more expensive to sell in the US and your business sales may drop.

 

HST is a new sales tax which will help reduce the cost to businesses however I am not sure if anyone realizes the impact to the everyday consumer.  There are more items subject to tax therefore the disposable income of many people will drop.  At the same time, a newspaper reported that sales for luxury houses is at an all time high in Canada. Does that mean that the HST may not have any impact on wealthier customers but if your business caters to customers who do not have a lot of excess cash flow, your business could suffer?

 

The economy is now global even if your business is local. What affects one business may not affect another.  It all depends on who your customer is, what market niche do you sell to and if your product is a necessity or a luxury.  Each one of those markets is affected by many different items going on in our global economy.  Rising interest rates may affect some lower end businesses and have no impact on others.  You need to assess who your market is catering to and determine if any of these economic uncertainties has an impact on your business or the business you want to buy.

 

If they do impact the business you want to buy, you need to reflect these uncertainties in the price you offer for the business.


Filed under: Selling a business — Gary Landa @ 8:32 am


No Comments »


No comments yet.


RSS feed for comments on this post. TrackBack URL


Leave a comment


You must be logged in to post a comment.