My shop just had a bad year. Should I wait to sell, or sell now anyway?
Buyers and lenders look at a business's earnings over multiple years, not just the last twelve months. A single down year surrounded by strong ones tells a different story than a business that's been declining for three years straight. If your bad year had a clear cause, something that's over now, a lost lease, a staffing problem you've since fixed, construction on the street out front, that context matters and can be explained. If the decline is ongoing and you can't point to a reason it'll reverse, waiting usually means selling into weaker numbers, not stronger ones. We're not tax or legal advisors, talk to your CPA and attorney about how a sale in the current year compares to waiting. What we can do is help you think through what buyers will actually see.
If this sounds like youYou had a year you'd rather forget. Revenue dropped, margins got tight, maybe you lost a key tech or the building needed work. Now you're wondering whether to sell before things get worse or wait until the numbers look better. It's one of the hardest calls an owner faces, and there's real anxiety on both sides of it. The honest answer is that it depends on what caused the bad year and what the three to five years before it looked like.
What you can do.
Sell now and explain the year
If you have strong numbers from prior years and a clear reason for the dip, most experienced buyers will listen. They'll look at the trend, not just the bottom of it. Sellers who can walk a buyer through what happened and why it won't continue are in a better position than owners who hide the year and hope nobody asks. Transparency tends to hold deals together better than surprises do.
Wait and rebuild one strong year
If the business is fundamentally sound and you can point to things you've already changed, adding one more year of good numbers to your track record gives buyers and lenders more confidence. This makes the most sense when you're not in a financial position that forces your hand, and when you genuinely believe the turnaround is real and showing in the monthly numbers.
Sell now under a structure that reflects the risk
Some deals are structured to account for a business in transition. An earnout, where part of the price is tied to future performance, lets a buyer pay for a turnaround they're taking on faith. It's not right for every situation, but it's a real tool that can close the gap between what a seller thinks the business is worth and what a buyer is willing to pay today.
What to watch for.
- If your shop's decline has lasted more than two years and you haven't pinpointed why, waiting is unlikely to fix the picture. A buyer doing their homework will find the same trend you're looking at.
- Lenders financing a shop purchase will average out earnings over several years. One bad year hurts less if the years around it were solid. Three consecutive weak years make financing much harder to get, which shrinks your pool of buyers.
- Personal burnout is a real factor. Owners who wait to sell because they think the numbers will improve sometimes wait through years of stress that take a real toll. Knowing when enough is enough is a decision, not a weakness.
Owner to owner, and it stays private.
Lotus PE works with shop owners in Massachusetts and Connecticut who are trying to figure out whether now is the right time. We've seen deals close after rough years when the story was told honestly, and we've seen owners benefit from one more year of rebuilding before going to market. James can walk through your specific situation with you. Talk to James to get started.
James StephensonLotus, Massachusetts and Connecticut
Quick answers.
Q: Will buyers automatically low ball me after a bad year?
A: Some will try. But buyers who understand auto repair businesses know that one year can swing for reasons outside an owner's control. The strength of the offer depends on what your prior years looked like, what caused the dip and whether the buyer believes it's behind you.
Q: How far back do buyers look at the financials?
A: Most buyers ask for three years of tax returns or profit and loss statements. SBA lenders typically want three years as well. That means one bad year is one out of three, not the whole story.
Q: What if the bad year was because I was sick or dealing with a family situation?
A: That context is worth sharing. Buyers know owner operated businesses are dependent on the owner. If you were out for six months and revenue dropped, that's explainable. If you're back and the last few months show recovery, bring that data to the conversation.
Q: Should I try to boost sales before listing?
A: There's a difference between genuinely growing the business and manufacturing a short term revenue spike that doesn't hold. Buyers and their advisors can usually tell the difference. Sustainable improvements are worth making. Deferred maintenance caught up on before sale is a reasonable move. Inflating revenue artificially tends to unravel in due diligence.
Q: Does waiting always mean selling at a higher price?
A: Not necessarily. Market conditions change. Interest rates affect how much buyers can finance. Owner health and energy matter. Waiting for a perfect year that keeps not arriving costs time and sometimes opportunity. The goal is a good deal at the right time, not a perfect deal at a time that never comes.
Thinking about what comes next for your shop or building?
Tell James a little about it. Only James reads it, and the conversation stays private. No pressure, no broker and no mailing list.