As the midpoint of the year passes, many business owners are re-evaluating their businesses. With uncertainties surrounding the economy and potential rises in taxes, it’s no surprise that business owners are leaning towards selling in the next year. So, is 2022 a good year to sell a business?
Supply and Demand
The strength of small businesses was tested over the past year. As many businesses begin to recover, there is a surge of buyers in the market ready to buy with cash offers. Due to higher consumer demand, the value of businesses is steadily increasing. According to the NFIB Small Business Optimism Index, the net percentage of owners raising their selling prices increased to 47% this year, the highest it’s been since 1981. With an increased demand for businesses, there is potential to get some more money in your pocket if you decide to sell your business in 2022.
It’s no secret that businesses across all industries have been facing labor shortages this year. While you can create plans to fill crucial open positions, having a lack of labor could be a reason you may look to sell in 2022. According to Forbes, about 79% of small business owners have been working more hours this year while trying to fill open positions. Many businesses are going to wait out this shortage, while some may decide to sell before more people come back into the workforce.
During the Biden administration, there is potential for capital gains tax rates to go up. According to Forbes, “The proposed 39.6% capital gains bracket would apply to taxpayers with earned income in excess of $1 million ($500,000 for married filing separately), indexed for inflation after 2022”. While this won’t affect most small business owners, if you decide to sell your business and your income goes over that $1million mark, you could be taxed at that higher rate. Congress has yet to act on this proposition, but it is always a good idea to keep in mind future tax events when deciding to sell your business.
Between the high demand of businesses in the market to labor shortages putting stress on small businesses, 2022 may just be the year to sell your business. If you are considering selling your business, be sure to contact one of our agents here at Alliant Capital Advisors. We will schedule a free consultation with you to evaluate your business and take the next steps towards a successful sale.