Selling a Business: What’s the Forecast?
If you’re a business owner thinking about your exit – or if you’re an aspiring business broker seriously considering getting into our industry – the condition of the market for buying and selling a business – and the forecast for its future – would be pretty good information to have, don’t you think?
Over the past several years, I’ve written often what has been driving the market for our service. (You can read some of those posts here, here and here.) But with the advent of a new year and the increasingly frothy political landscape generated by an upcoming U. S. election that will probably be of enormous consequence, what the market for selling a business will be in 202o is a hot topic out here in the trenches.
What are the Current Conditions
What are the current conditions for selling a business? Well, in short – “Sunny and warm”.
Notwithstanding the hue and cry of the evening news and the editorial page of most mainstream newspapers, most people are pretty optimistic at the moment.
Pretty much anybody who wants to work has a job. Even given the disincentives to hire in much of the E.U, unemployment is low. At 3.5% in the U.S., it’s plumbing the depths of of its all-time record low.
Wages are up in all sectors across the board – even without minimum wage mandates.
The stock market – as measured by the S&P 500 – was up 28.9% in 2019. The tech-heavy Nasdaq was up an astonishing 35.2%! Real estate prices appreciated handsomely, interest rates remain low and lenders are eager to lend. Outside of the socialist paradises of Venezuela, Cuba and the restaurant industry in Seattle, people are generally pretty optimistic.
So, given all that good news, what does the market look like for buyers and sellers – and business brokers! – this year?
Our course, The Basic “How-To” of Becoming a Business Broker”, teaches how to market and sell businesses.
Become a Professional Business Broker…
In short, “Continued sunny and warm in the near term but the long-term forecast suggests it’s possible a cold front will descend from the north with a chance of cloudy conditions appearing in the United States as we get closer to November.”
Such “down-the-road” concerns are no more than mists on the horizon at the moment. There’s still the proverbial boatload of money out there looking for good businesses to buy. We see two sweet spots
1) The Main Street market is active from the increased wealth the stock market has provided to wage earning savers. There are a lot more people that have had long-time dreams of owning a small business and are now in a position to buy one.
2) In the lower Middle Market, we get contacted every week by three or four private equity firms or family offices that are looking for businesses with revenues in the $5 million to $20 million range.
There’s every reason to believe that, absent a calamity, the market should stay relatively robust, at least until early November.
Timing the Peak: a Fool’s Errand
Some sellers who have been reading this blog and watching the stock market have been holding off bringing their business to market in the hope of getting the highest possible price. But trying to time the peak of this market is like trying to time the peak of any market; In a word, it’s “impossible”. And unlike selling stock or gold or collectibles, which can be done is seconds, minutes or days, selling a business takes many months and sometimes years – unless the sellers want to give it away. And even then it’ll take a couple of months.
For a year or more stock market prognosticators have been warning that things can’t go up forever. A correction is inevitable. The cause may be the new virus out of China, Iran testing a nuclear weapon, an avowed socialist getting elected president in the U.S. or French bakers striking thus drying up the supply of croissants au chocolat (mon Dieu!) – but one will happen.
And when it does, you don’t want to be left standing when all the other chairs have been taken.
It’s easy to sell a business in a strong, bullish market – that is, if you hire the right business broker to make it happen.
But it’s when the poop hits the fan that professional business brokers are invaluable.
Our course, The Basic “How-To” of Becoming a Business Broker”, teaches how to become a professional business broker.
Become a Professional Business Broker…
The Bottom Line
Even in normal circumstances, when selling a business, business owners need the advice of professional business brokers. Given the many uncertainties in the forecast, sound advice is – and will continue to be – in high demand.
So, if you’re a business owner that has considered selling, it’s remotely possible that, a year from now, the China virus will have been tamed, Iran may have decided to join the rest of the civilized world, a free-market oriented administration will be ascendant in Washington, the Brexit tumult will have settled in the U. K. and croissants au chocolat will be readily available on any given corner throughout the French Republic.
But as time passes, risk rises. If you’ve been considering selling a business, consider sitting down with a professional business broker now. If you’ve been considering becoming a business broker, now’s the time to get serious about. (The next class starts next month.)
If you have any questions, comments or feedback on this topic – or any topic related to business – I want to hear from you. Put them in the Comments box below. Start the conversation and I’ll get back to you with answers or my own comments. If I get enough on one topic, I’ll address them in a future post or podcast.
I’ll be back with you again next Monday. In the meantime, I hope you have a profitable week!