In the midst of all the negative news about the Coronavirus, and the political back-and-forth that makes people lament the days when our nation seemed less divided, there is some good news for you, as a business owner, if you are thinking about selling your business. Namely, that this is a strong market for sellers. With my several decades’ experience in this industry, I haven’t seen the market for sellers in a stronger position.
There are several reasons for this – not the least of which is that there are a good number of potential buyers out there who are looking for their next opportunity. The current stock market and interest rate environment are the reasons for much of the merger and acquisition activity. There is basically a lot of money in the hands of Private Equity Groups and individual buyers can get very low interest loans. Small to medium size businesses have a strong rate of return compared to other investment options. Add to that a rebounding economy, and that there has always existed a strong entrepreneurial spirit in our country – and this is a time when large numbers of people are looking for the right businesses to buy.
Many potential buyers also understand that purchasing an existing business with a proven track record can afford a significant advantage over going out and starting a business from scratch. Even a small business should produce a good income after the purchase debt service is paid each month. Yes, many people do start businesses on their own and do so successfully, but there is also something appealing about stepping into a successful operating company. I often compare buying a start up franchise to an operating business. In a franchise typically you open the doors and wait for the first customer. In addition to the opening and franchise purchase costs, you have operating expense until breakeven is reached. When you buy an existing business, the previous owner should provide full training and the customers are already there.
In short, the time is right if you are thinking about selling. We are currently seeing some businesses sell at over the calculated fair market value with multiple bids! With that said, you are in the strongest position to do so if you have worked with an advisor who can help you prepare and maximize the value of your business before you go to market. Do you have accurate financials that are updated monthly? I have seen businesses doing over ten million a year that do not have accurate financials! Do you have a team in place that your successor can rely on? Is there diversity in your client base, meaning that your business is not too dependent on any one client? These points and others can be discussed in advance to result in the highest value business sale for an exiting owner.
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If you are thinking about going to market, you should speak with someone who has guided many business owners through the process. The time to begin the discussions with a business broker/advisor is well in advance of when you hope to turn over the keys. A frank discussion about what you still might need to do to have your business ready for sale is the first step.
COVID-19 has brought some businesses to the forefront – such as HVAC, pet supplies, healthcare, retail recreation products and manufacturing as well as others that are not affected by COVID, or in some cases have been positively affected by it.
HVAC companies are hot properties in the market today!
If you are wondering how your business shapes up in this market and are thinking you might be interested in selling in the next few years, give us a call! Let’s have a no-obligation conversation about what you need to do to get ready. We have years of experience with businesses across a wide range of industries and would be glad to listen – and offer you some advice on how to get started.
Meantime stay tuned – we will be adding to our blog regularly with tips that will help you understand the process of preparing a company for sale and the actual process of selling.
ROI Corporation, based in the Boston market, has been involved in the sale of businesses and real estate in over 30 states since 1997. They also assist in the transfer of business ownership between generations and to key employees and management teams. ROI serves all of New England including MA, NH, RI, ME and CT with two divisions: a main street division serving smaller businesses as well as their middle market M&A division. Their Marietta, Georgia office, specializing in Service Distribution & Manufacturing Companies, serves the southeast United States. For more information, please visit us on the web at www.roimergers.com or call (781) 682-6209.