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by | Jun 1, 2015 | Sell Your Company, Sell Your Franchise, Sell Your Southwest Florida Business

Selling Your Business in a Seller’s Market

Chance-Opportunity

You would think it would be easy selling a quality business in a seller’s market, but it never is. Using fishing vernacular, most fish are lost as the fisherman tries to get them into the boat. Particular care, experience, and focus are required to be successful. Even with an over-supply of qualified buyers looking for quality businesses with owner benefits of over $250,000 (EBITDA/SDCF), and even more so for businesses with more than $1 million owner benefit, a seller’s agent needs to be prepared.

We all know that timing is everything. The window of opportunity is now open, but how long it will last is not known. If a seller misses the window of opportunity, there will be a wait for the business cycle to bottom out and then start up again, which can take years. By not being prepared, a seller can miss the window of opportunity to sell at the best time.

A buyer looking at a business in the EBITDA/SDCF range stated expects a professional-looking package with all the components ready and available in an appropriate format. Having helped buyers find businesses to buy, I still find it amazing that such a professional package is often missing or incomplete.

The issue is that the elements that have created the seller’s market won’t last forever. Those elements are low interest rates, being on the upside of the overall economic cycle, optimism about the economy in general, and the group known as baby boomers (http://en.wikipedia.org/wiki/Baby_boomers) holding onto their businesses longer than expected (April 2014). Data from US Census Bureau show that there are 76.4 million baby boomers (http://www.prb.org/Publications/Articles/2002/JustHowManyBabyBoomersAreThere.aspx). Very few of the baby-boomer business owners have come to market to sell their businesses, for reasons unknown. Once boomers do start coming to market to sell their businesses, the market can quickly change to a buyer’s market as supply greatly increases.

Various sources over the years show that nine out of 10 businesses do not sell. While no known study has been conducted to establish why this is so, my more than 40 years of experience in the field suggest that being overpriced, or having poor or unverifiable accounting records, are the most likely top reasons for those businesses going unsold.

A seller will want their businesses on the high side of the pricing range to allow room for negotiation, as well as to test the market. This high-side range has to have some relationship to what similar businesses have sold for. Many times, eager sales agents will accept whatever a seller “feels” is the value of the business to get the engagement, rather than helping the seller come to grips with reality and the here-and-now. By not doing so, the seller will lose time, and could lose the window of opportunity.

If you would like a confidential conversation about how to prepare your business to be sold, feel free to contact me at 888-893-6661 or bobd@dolansales.com. My LinkedIn profile is: http://www.linkedin.com/in/dolansales.

© 2015 Dolan Sales, Inc.

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