The best time to sell is when there is high demand and low supply: a seller’s market. With an optimistic view of the economy, low interest rates, low inflation, and the availability of funding, this is the time to sell; waiting for another year for better results may not be the smart thing to do.
The bank that will fund the transaction will look at the most current tax return of the business to validate results. With 2014 being a good year for many businesses, the smart thing to do may be to go to market while the economy still has an upward projectile and interest rates are low. The value of your business will diminish with a rise in interest rates, which seems certain to be coming.
If you hope for 2015 to be a better year than 2014 and provide you a higher price, consider that this could put you on the downside of the current economic trend. This is because, once 2015 has ended, it could take another year to find a buyer and close the transaction, which puts you two years out from today. A lot can happen in two years with the economy, boomers coming to market, and geopolitical events, all of which will affect the willingness of buyers to pay premium prices.
Another consideration against waiting another year is the flood of baby boomers wanting to retire and sell their businesses. Boomers have not come to the market yet, perhaps because they are waiting for the economy to improve. A substantial increase of quality businesses for sale will help turn a seller’s market into a buyer’s market.
For businesses that enjoy EBITDA/SDCF (owner benefit) of greater than $1 million, there is another important consideration. Private equity companies and public companies with trillions of dollars are sitting on the sideline, are looking for acquisitions. They have to invest their money by the end of 2015 or they will have to return the money, and lose the potential fees they would earn. What this produces is a willingness to pay premium prices to buy earnings and make their numbers.
Dolan Sales is well-connected to private equity companies currently engaged in the market.
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.
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