For the past 2 years, the market for selling businesses has been red hot. A record number of businesses changed hands in 2018, and sale prices reached historic highs. The 2019 market has picked up where 2018 left off, continuing a trend of increased buyer demand and higher sale prices. However, this upward movement will eventually stall and enter a correction period. There are reasons to believe that the market could be changing soon, and that right now is the best time to sell, while sellers still have the advantage.
What to Consider
The economy as a whole has been on an upward swing for several years now, and a recession is overdue. A period of market correction has been predicted to be on the horizon for a while. Even though key interest rates recently decreased, economic lulls have historically occurred every 10 years or so. With the Great Recession almost 10 years behind us, the next one could be right around the corner. Already there have been brief fluctuations in the stock market and the trade war does not look like it’s going to be resolved any time soon.
In addition to an inevitable a market reset, an election year is approaching. Election years have been known to soften the market because they create uncertainty. This results in a reluctance by entrepreneurs and investors to make major fiscal changes, such as expanding or purchasing a new business. A potential administration change could result in new tax laws, and economic policies that may or may not be better for small businesses.
Baby boomers have been fueling the market for business sales. While this steady increase in inventory has helped supply the market with healthy, high quality businesses, boomers are entering the marketplace at a fast rate than ever before. If this trend continues, it could result in excess supply and water down the market. This would create a buyers’ market where quality businesses could be bought for much lower prices, because there will be so many to choose from.
Why It’s Still a Great Time to Sell
Big changes could be on the horizon, but the current market for business sales is very healthy, making right now the perfect time to sell a business. Buyer demand remains very high and optimism is also high for buyers, sellers and lenders. The SBA and other lenders have made it very easy to borrow, aggressively funding loans and making capital readily available. Due to taxes being lower, you will earn more from a sale after taxes. Sales price multiples remain very high and sellers are achieving on average 93% of their asking price. With all of these factors in mind, it’s better to sell now, from a position of strength.
How to Prepare to Sell Your Business
If you don’t already have an exit strategy, make sure you have one in place before you sell your business. This means not only preparing the business to sell, but also having a plan for your life after the sale. Get ready by getting your financials in order and making sure you have at least 3 years’ worth of clear and consistent reports. Buyers are doing their due diligence, evaluating the profitability of every opportunity, so you have to make sure your financials show that your business is healthy and growing, and that every dollar is accounted for. Continue to invest in your business and run it as though you are keeping it. Deciding to sell does not mean it’s time to take it easy and neglect your responsibilities as a business owner. Keep running things as is, and even look for ways to add value anywhere you can. This will help show that your business has growth potential and help you to negotiate a higher asking price.
Selling a business can take time, so don’t hesitate to take action on listing your business for sale. Acting quickly can reduce the likelihood that your business will still be on the market when the economy inevitably slows down. To find out more about preparing your business for sale, contact Corporate Investment Business Brokers (CIBB). Headquartered in Fort Myers, CIBB has been helping Southwest Florida business owners sell their companies profitably for over 30 years. With experience selling both small and large businesses, from all types of industries, our brokers are well equipped to coach you through the sale process and help you get the highest possible profit from your business sale. Call us at (239) 936-1718, or send us a message to get the process going with a free, no-obligation business valuation estimate.