It Is A Good Time To Sell Your Business

Over the past three plus years we have seen either recession or minimal growth. There have been fewer businesses buyers and far too many businesses with poor results.  It just has been a difficult time to sell a business.

However, since the start of 2010, the economy has stabilized and begun to emerge from the recession.  With greater stability, more buyers have been entering the market, looking for solid, profitable businesses to acquire.  With the impending election two weeks away, expect more certainty, thus even more stability in the market.  More stability will bring even more buyers to the market.

“There are just few solid, profitable businesses to acquire right now due to the continuing mediocre economy.  It is very much a sellers’ market as a large number of buyers have re-entered the market and are now competing for the few good businesses,” says Eric Gall, Regional Vice President, FBX Advisors - Fort Myers-Naples and Business Intermediary at Florida Business Exchange, Inc..

Demand for businesses is increasing due to:

• Corporate Acquisition:  Recessions require companies to cut costs, consolidate operations, strengthen balance sheets and hold onto cash. Once the economy begins to emerge from the recession, a company's focus shifts to growth and the acquisition process begins.

• Individual Acquisition:  When an economy begins to move from recession to growth, buyers’ will look at a business's potential for growth and evaluate the opportunity accordingly.


• Low Cost of Capital:  Interest rates are at historically low levels in order to stimulate growth. These rates should remain low until inflationary pressure increases them. Low interest rates make the cost of acquisitions very attractive relative to the cost of funding them.

Factors indicating this is a good time to sell are:

• Shortage of Solid, Profitable Businesses:  Certain businesses have done well in spite of the recession. Businesses listed for sale after a period of good results tend to get the best price as determined by a multiple of earnings.

• Shortage of Properly Priced Businesses:  Businesses typically sell at or near historical multiples of revenue and earnings. The multiples of BBF listed companies are currently at high levels and frankly, I believe many are far too high.  A properly priced business becomes instantly very attractive in the present market.

• Stronger Multiples:  Profits are generally lower during or immediately after a recession. Buyers expect to pay slightly higher multiples expecting profits to increase. Therefore, a company’s whose profits have maintained or returned to a healthy level, are very attractive.

Says Gall: “There is definitely a great ‘window of opportunity’ to sell a business right now, as buyers are prepared to pay a premium for a solid, profitable business. We have seen a significant increase in the number of motivated buyers entering the market this year. There is also added incentive for sellers to complete transactions prior to year-end to take advantage of the low capital gains tax rate set to expire. Strong demand and motivated sellers should lead to a very active 4th quarter of 2010.”