Now May Be The Best Time To Sell Your Business
Jim Cohen, CBI, Sunbelt Business Brokers, Chicago, IL

Many business owners believe it’s not smart to put a business on the market during tough economic times. Contrary to popular belief, now may be the best time to sell a business. Although it might seem like a risky move, the reality is that more buyers are now searching for businesses. An increasing number of layoffs have resulted in many individuals choosing to skip the traditional job search and instead go on a search for their own business. You are probably experiencing a dramatic increase in buyer inquiries as compared to a year ago.

There are two types of business buyers most relevant to today’s seller: high net worth individuals and strategic buyers. With the current economy and job market, not only are these two groups searching for businesses right now, but they also understand value and are not shy about making strong offers.

The High Net Worth Buyer (a.k.a. “The Forced Entrepreneur” and “The Corporate Refugee”)
An estimated 1.2 million people lost their jobs in 2008 and many of them, laborers and executives alike, will find it difficult or impossible to find new positions. Because of this, many displaced employees will deem it necessary to take matters into their own hands and search to become their own bosses.

During the process of pre-screening buyers to help them find the right business, many future business owners have made statements such as: “I just got downsized for the last time,” or “I am going to take control my own destiny.” This feedback will continue as layoffs persist. This kind of increase in buyer interest typically comes in conjunction with turbulent economies, such as post-9/11, so the current activity is not surprising.

The high net worth buyer (forced entrepreneur) is seeking to buy a business with existing cash flow, rather than starting from scratch. Because there is an abundance of this type of buyer at the moment, the demand for businesses is high. Of course, this is great news for business sellers.

The Corporate Refugee
Not only are multitudes of the newly unemployed looking for business opportunities, there are many others who are currently employed but see “the writing on the wall” or “just don’t like” what they observe going on in their workplace. All of these people need income replacement and buying a business might be just what they need.

Something these folks come to understand when looking to become entrepreneurs is the fact that an existing business is a much better investment for their time and money than a start-up business. For example, an existing business already has a name, location, vendors, employees, customers, a reputation in the marketplace and perhaps even a Web site and marketing strategies. The business buyer comes in the first day after the sale and makes money.

There are obvious monetary benefits of owning a privately-held business, which is one big factor business buyers seek. The “owner’s economic benefit” will not only cover the debt service the buyers will incur in making a purchase, but also put food on the table and leave some money for capital expenditures.

Strategic Buyers
Strategic buyers in this economy are looking to expand through acquisition, especially given the low interest rates on business loans. They could be interested in adding revenues, profits, services, customers, intellectual property or many other things. Since they have a specific type of business in mind, when they find it they may be more likely to meet the seller’s needs and often offer the best price for the business.

The Economic Forecast for Sellers
Receipt of multiple offers on businesses is not at all unusual. With the current economic condition, however, there will likely be a rise in the number of multiple offers received at the same time for an individual entity. This creates even more competition for a business than usual, and can result in a higher selling price.

Whether 2008 was a business’s best year ever, or more reflective of the overall economic performance we read about every day, it is wise to get educated on the important value drivers of the market, how to obtain and understand the business value and the need to confidentially market a business. This economy should not dissuade a seller. Many new entrepreneurs emerge in recessionary times, which means that a business seller should only capitalize on the moment.

Jim can be reached at jcohen@sunbeltnetwork.com.

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