Inflation. Like the ghost-face killer from Scream, it seems to be making a comeback this year. And it is scary.
How scary? Well, the Wall Street Journal has written or recorded 1,253 blogs, videos, and articles about the topic between October 31, 2021, and January 29, 2022. And according to the Consumer Price Index report released by the Bureau of Labor Statistics on January 12, 2022, inflation raised prices on all items “7.0 percent for the 12 months ending December, the largest 12-month increase since the period ending June 1982.” (you can find that report here.)
And we know the reasons. The supply chain is working through some kinks throwing supply vs. demand all out of whack. Hiring has been a challenge. When we can find help, labor costs are going up. And the Fed has dumped a bunch of money into the economy to stave off a recession – which it did, but it also has contributed to the highest inflation levels in history
But here is the thing. Do you know what is not affected by rising inflation costs? The cost to buy a business.
Typically, businesses are valued based on their previous full year in business. There is no supply chain component to that assessment outside of what is shown on a business’s tax returns and profit and loss statements.
That means while car manufacturers are raising prices on their inventory because they can’t get the semiconductors, they need to fuel their computers on wheels, a business’ sales price is not affected by that at all. Or the price of lumber. Or any other raw ingredients.
There is no labor component to it. While I’m always looking for more smart, savvy, hungry brokers to join my team, my team’s staffing levels have no effect on how I price my client’s business. I do not get to raise prices on my client’s businesses because I lose staff members. I will not be able to reduce them when I gain staff members. Following up on the paragraph above, I also cannot raise or lower prices because my inventory of businesses for sale is low or high.
Businesses are priced on their performance in the proceeding years. Period.
So if you are looking for opportunities to maximize the value of those digits in your bank account, consider taking a look at the businesses we have for sale in Anne Arundel County and reach out if something caught your eye.
While the prices of everything else is skyrocketing around us, the price of our businesses for sale is holding steady.