Is 2020 The Time to Buy or Sell a Business?

Is now the time to buy or sell a business? No matter what the macro economy is doing at any given time we believe this is almost always a very individual, personalized decision. It is a decision that should not be made in haste or because of a one- or two-month revenue shake up. For small, privately held businesses under approximately two million dollars it’s vital to make the right selling decision. Even if you as the business owner or the ownership team aren’t sure that 2020 is the year to list and sell your business confidentially it would benefit you to understand timing.   Mr. Russell Cohen of Murphy Business Sales Business, in a May 21, 2020 webinar hosted by Mr. Jim Parker, State Chairman of the Business Brokers of Florida, stated: “It takes nine months to sell a business, sometimes longer.”  Most business brokers will not take on a business owner that expects to sell in 90 days. Again, is this the right time to sell your business? There are steps you can take to give you the insight you need to make this decision.

Depending on market volatility potential business buyers and sellers can be understandably apprehensive about the future. Indecision and frustration can set in, then inaction. We believe small business owners should at least know the value of their business at almost any time. We believe that, at a minimum, small business owners obtain, before even considering a sale, a qualified broker opinion of value for their business. That kind of data can provide a small business owner valuable insight regarding whether  to sell.  What we call a broker opinion of value provides clear market insight and an in depth look at financials, to give either a strong opinion or snapshot.    

Let’s talk about buyers right now. The other side of the sale, the buyer, may have a myriad of reasons to buy your business. If you are ever approached by a potential buyer how would you know if you were getting a good offer?  What if someone asked what your business is worth? What would you say? Buyers are always on the prowl and they may be motivated by market volatility to leave their corporate career and buy your business. But if they don’t know it exists and you have not connected with them, often without the help of a business broker, you don’t know who may be interested.

There are multiple, solid, fundamental reasons for buying a business:

–  Desire and Ambition to Lead. The desire to lead your own company. This is a powerful force and has probably led you to own your business. Buyers have those same ambitions.

–  Pure Financial Reasons. The ability to secure an existing immediate cash flow.  A proven track record  reduces risk and sophisticated small business buyers know this.

–  Established Reputation to Grow. The business provides existing equipment, skilled employees with process expertise, or an established reputation. 

As we look at 2020 it may be an unprecedented time for consternation and panic but it also happens to be one of the best times in human history for money. Simply put, right now financing rates are historically low, and programs have been established, through the SBA for example, that encourage acquisition by assisting buyers with initial principal and interest payments.  As William Bruce, President of the American Business Brokers Association reports in a June 2020 interview, “SBA 7(a) businessacquisition loans are available and the SBA is actively lending.” Money has never been cheaper as some might say. Owners who are less risk averse or are more senior may be more inclined to sell due to an uncertain future and the realization, given the current Covid-19  and economic situation, that continuous economic growth may not be given in their immediate future.  Owners may be more conscious as a result that it is time to develop an appropriate exit strategy which may include sale of their business.

Now may be the time to get peak value, before another downturn or slump in the economy.  They may realize that the market may move from a seller’s market to a buyer’s market, so now is a good time to sell, ahead of that transition.  If now is the time to buy or sell, for whatever reason, Oak Capital Advisors looks forward to guiding clients through the transition process, helping to complete a successful transaction for both parties involved.