What Rising Business Values Mean for Your Next Move
The pace of activity in the small-business marketplace is brisk as more business owners are finally pulling the trigger on their exit plans.
According to data from my company, BizBuySell.com, activity in the business-for-sale marketplace increased 49 percent in 2013 compared with 2012. Final business-sale prices are also rising as small businesses improve revenue and cash flow, pushing the median sale price to a level that hasn't been seen since before the recession.
The high volume of activity in business transactions can be attributed to a variety of factors. Improved lending options, a strengthening U.S. economy, and other variables are clearly playing a role in attracting both buyers and sellers to the marketplace.
But what does a higher volume of business-for-sale transactions mean for the value of your business? More important, how should it influence your plans for your company?
Making Sense of the Trend
For some business owners, the increase in small-business transactions will significantly alter their short-term plans, while for others it will have little immediate effect. In general, the impact of the active business-for-sale marketplace on your business will depend on your personal goals and circumstances.
If you have been waiting to sell your business…
Some business owners have been waiting to sell their companies until the market recovered. For many of these sellers, now is the right time to list their businesses, especially if they have taken steps to substantially improve their companies' financial conditions and can document a growth trend.
With many businesses reporting stronger financials, buyers are more confident about purchase decisions and are willing to pay more for healthy businesses. Combined with improved borrowing conditions and greater access to funding for prospective buyers, your company's solid financial condition may be a sign that the time to enter the business-for-sale marketplace has finally arrived.
If you aren't in a hurry to sell your business…
Business owners who aren't poised to immediately sell their companies could reap greater returns by waiting a while longer. The current pace of small-business transactions is expected to continue for the foreseeable future. Right now, the market is working through a backlog of businesses for sale. Eventually, supply will tighten and drive up sale prices even further.
The downside of waiting to sell your business is risk. Unexpected changes in the U.S. economic outlook or a few bad quarters could make your business less valuable than it is now. However, if you're confident in your ability to continue to expand the company and aren't itching to sell your business right away, holding off a while longer may be the smart move.
Whether you plan to sell now or later…
In the current business-for-sale marketplace, there is an abundance of both buyers and sellers. So regardless of whether you plan to sell your business now or hold on to it a little longer, the success of your sale will be a factor of your ability to differentiate your business from the competition.
Skilled business brokers have the experience and expertise to position your business in the marketplace and to attract a large pool of prospective buyers to your listing. In addition to helping you target buyers who are willing to pay more for your company, the right broker can offer valuable guidance about documenting your business's financial condition and growth curve.
Overall, a high level of activity in the business-for-sale marketplace is good news for sellers. But cashing in on robust demand for good business opportunities is easier said than done. By evaluating your motivations and continuing to improve your financials, you can significantly improve business value--regardless of when you decide to sell the company.