3 Reasons to Be Optimistic About Business Deals
Earlier this month, I had the pleasure of attending the International Business Brokers Association Spring Conference in Las Vegas. I have attended many IBBA conferences over the years, but this one had an especially optimistic feel. As the economy has recovered, both buyers and sellers have returned to the business-for-sale market in record numbers, making it a particularly good time to be buying or selling a small business.
Here are three trends underlying the optimism.
1. Transaction volumes are trending up.
When the Great Recession hit, small-business transactions rapidly declined and then bumped along with anemic growth for years. Then 2013 came along, and transactions rocketed 49 percent year over year, setting a new all-time transaction-volume record. Most of the brokers I met at the IBBA conference reported equally strong or even stronger activity year-to-date in 2014, and are more convinced than I've ever seen that the improvement is a long-term trend.
That's good news for prospective business buyers and sellers, as the increased activity points to an increase in both supply of quality small businesses and corresponding buyer demand. In fact, in a recent survey of national business brokers by BizBuySell.com, more than 70 percent of respondents believed more small-business deals would get done over the remainder of 2014 than have already closed in the first half of the year. Among the reasons cited for optimism were seller price expectations becoming more realistic (27 percent), a continued improvement of the small-business environment (20 percent), an increase in the number of buyers (19 percent), and an increase in the number of sellers (18 percent).
2. Seller financing is still going strong.
Though seller financing has always been a key tool in small-business sales, during the recession it became critical. By offering their own personal financing option, some business owners were still able to sell their businesses even though banks weren't lending and buyers' savings had been decimated. Brokers at the IBBA conference still see seller financing as a key to closing deals in 2014. In fact, in the same broker survey referenced above, more than 80 percent of business brokers said that seller financing is either important or essential to completing the sales process.
This means is that owners planning to sell in the near future should expect to offer seller financing and be ready to receive payment over the course of a few years rather than 100 percent up front. Though this does mean a longer payout, the silver lining is that it can reduce the seller's tax burden.
3. Online marketing has an ever-growing reach.
Though fliers, pamphlets, and print can and do still play a role, more and more companies are realizing the power of online-marketing options and benefiting from the incredible reach these low-cost channels provide. Listing sites are essential, email marketing continues to grow, and many brokers are now also tapping into social media to get as many eyes as possible on the businesses they are selling. Though there will always be a need for one-on-one site visits and in-person negotiations during the sales process, according to brokers at the IBBA conference and my personal observations over the past few years, the initial marketing focus is transitioning to an interactive platform.
On a side note, this will be my final contribution to the Selling a Business column on Inc.com. A big thank-you to all the readers and the Inc. staff members who have supported me along the way. Thanks again, and all the best to the small-business owners and aspiring entrepreneurs out there. You truly keep the American economy humming!