Selling Your Business: What’s the Market Like?

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Selling Your Business?

We’ve gotten a TON (or “tonne” pour mes amis Francais et Englais) of questions over the years about the state of the business buying market; what’s selling? who’s buying? what is the demand level? If you’ve been considering selling your business, I imagine these questions have also occurred to you.

Selling Your Business

What should I do???

Well, this could be an extremely short post because the answers – without elaboration – could be single words:

  • Everything – That is, every business that is making money and is priced to produce a reasonable return to the buyer will find a buyer in this market.
  • Everybody – That is, individuals, investment groups, groups of friends, private equity groups, management teams, etc.
  • Frothy – That is, there are more buyers in the market than there are businesses to be bought.

This condition, which currently obtains in most Western democracies, benefits many, but two groups in particular should be smiling: business owners that are considering selling and anyone that has ever considered a career as a professional business broker or M&A (“mergers and acquisitions”) professional.

What’s driving this demand? Well, for one thing, at the moment there is a ton – une tonne! – of money out there looking for businesses to buy and this money is at all levels of the acquisition ladder; from small “mom and pop” buyers that are tired of working for someone else and ready to strike out on their own, to private equity groups that have raised more money than they seem to be able to find targets for, to large corporate entities that are intent on making a strategic acquisition to expand their geographic footprint or bolt on a complimentary business allowing them to move into a related industry immediately rather than start and grow a new arm from scratch. (For a classic example of a strategic “bolt-on” acquisition, see this article.)

Business Owners

In a recent post I explained why now is an excellent time to sell your business. If you are part of the Baby Boom generation and are approaching the point where you’d rather sail the tranquil

Sailing after selling your business

 Sunset on the Chesapeake Bay

Mediterranean as opposed to the rough seas of commerce, you will be hard-pressed to find a more robust market, better valuations and eager buyers than now. If you are a young entrepreneur that launched a company over the last 5-10 years, and crave the startup phase more than the day-to-day operational drudgery, buyers are interested in talking to you.

Things have changed over the past 16 months or so. People and businesses are more confident in the future. Interest rates, though beginning to rise slowly, are still historically low. Taxes – corporate and, for the most part, individual – have been reduced. Regulations in multiple countries have been reduced or are expected to decline. Amazingly enough, whether you own a small retail shop in town or a $25 million manufacturer or distributor, if your business is making money there are aspiring business owners out there looking for such opportunities. From Main St to the Middle Market, there are a lot of buyers and a lot of money.

If you are such an owner and are starting to think of selling, are you ready? Is your business ready?

It probably comes as no surprise that, in order to get the highest valuation, you have to prepare your business to warrant it. But I’ve riffed on that topic before (here and here) so there’s no need to belabor that point in a post about how frothy the market currently is. However, suffice it to say that, if you’ve prepared your business to achieve the highest valuation, you’re likely to be able to realize that valuation now, given the current demand in the market.

If you don’t know anything about valuations or how to get the highest, check out the above links or download a checklist that we’ve put together for business brokers of documents that they need to get started on a business valuation. You’ll need the same list to start valuing your business.

Business Brokers – or Becoming One

Needless to say, now is a great time to be in our business. Most business brokers and M&A firms are quite busy scurrying around matching buyers with businesses. Several trade groups expect this to be one of the best years for our industry and, of equal significance, even if some or all of the positive factors that currently obtain disappear over the next few years, the trend is for a very active decade as Boomers retire and no one in the next generation wants to take over (which is usually the case, unfortunately).

There is a boatload of businesses coming to market over the next 10-15 years as the Boomers pull out and not nearly enough professional business brokers to help these sellers get the best value for their life’s work and find the right buyer. If you’ve ever considered the executive and handsomely-compensated career of being a business broker, now would certainly be a good time to act. More of us are needed!

If this opportunity sounds interesting, I’ll send you some free information on how to become one. Just let me know where I should send it.

Professional business brokers are as critical to the sale of a business as are the business’ legal counsel and accounting firm. Neither of those professionals is likely to know how to value the business and even less about how to market the business to the largest number of potential buyers. What professional business brokers do for sellers is a service sellers need as much, if not more than, its legal counsel.

 

Drafting a ContractYou may have noticed that I emphasize the word professional when I refer to business brokers. That’s because, unlike real estate brokers, there are few licensing or educational requirements that would normally present a barrier, however modest, to someone that wants to get in the field. But there is a big difference between any Tom, Dick or Harry hanging out a shingle and printing some business cards, and a professional that has taken the courses, learned how to value business, learned how to market business, learned how to find buyers, learned how to guide the negotiations, etc., etc., etc. A professional business broker has invested time and money to learn his or her trade, is likely a member of a recognized organization with a code of ethics and professional certifications and is not a full-time hair dresser or auto salesman on.

The Market is Frothy

If you’ve ever considered selling your business, now is arguably the best time in the past 15 or so years to do so. The same thing can be said for business brokering; now is arguably the best time in the past 15 or so years to be a business broker. The current market conditions favor business owners that would like to sell and business brokers that are professional and know what they’re doing.

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. For example, if you’re a business owner, what is your biggest concern about the thought or process of selling your business? If you’d like to become a professional business broker, what are your biggest concerns or questions about that process? Let me know. 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!

Joe

The author holds a certification from the International Business Brokers Association (IBBA) as a Certified Business Intermediary (CBI) and can be reached at joe@WorldwideBusinessBlog.com

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