When is a good TIME to sell a business

TIMING THE SALE OF A BUSINESS GOES BACK TO BASIC ECONOMICS OF SUPPLY AND DEMAND

If there’s a lot of GOOD businesses for sale on the market, this creates increased choice of GOOD businesses to buy and can reduce competition amongst buyers for YOUR business. That is, when the choice of good businesses is more abundant, the risk of losing out on a good deal is less likely and, buyers can afford to hold out for something more exceptional.

Provided that you’re not under pressure to sell at a particular time, the perfect opportunity to sell your business is when there are FEWER GOOD BUSINESSES FOR SALE.

In other words, you want to be one of few good business opportunities for buyers to choose from. When a good business is rare to come across buyers can compete harder for your business.

So how does this fit into today’s market in 2012?

If you take on board the general gloomy outlook conveyed in the current market place, then you’ll probably be shying away from selling your business right now. This could be the worst decision if you have a good business to sell.

Let’s have a quick look at some key facts that may change your mind about holding onto selling your business.

THERE ARE MORE THAN DOUBLE THE NUMBER OF BUSINESS FOR SALE ENQUIRIES

We know from monitoring our Google Analytics that statistically there are now more than double the number of business for sale enquiries in Australia compared to the same time last year (300,000 approx. in the month July 2011 versus 700,000 approx. in the month July 2012). Granted this may not necessarily represent more quality buyers, we can’t dismiss the idea that it’s quite possible that the extra 400,000 odd enquiries may contain quality buyers that have entered the market.

In fact, let’s also consider the results from a survey conducted by the Australian Institute of Business Brokers who found that 66% of business brokers dealt with about the same number of buyers or more compared to the previous quarter. In this, the AIBB states that there “appears to be an overall increase in buyer interest over previous quarters with the emergence of cashed up qualified buyers ” (source: Australian Institute of Business Brokers Members survey – June 2012 quarter).

So, are there more quality buyers in the market…?

BUSINESS SALE PRICES REMAIN STABLE ON THE WHOLE

When deciding on whether you can achieve a higher sale price by selling your business now, consider comparing like for like, and in context with the business. That is, if the perception is that “sale prices have dropped”, look at the facts. Gather information on what types of businesses are selling and compare prices on like for like and in context with the actual businesses sold. For example, consider whether sale prices have dropped in real terms or whether the number of sales for the period were predominantly businesses sold at a lower price point (e.g. compromised businesses under financial stress to sell quickly), and therefore skewering the overall average sale price for the period.

According to the same survey, the number of business brokers who recorded sale prices that were either about the same or higher equated to 43% compared to the previous quarter. These figures were consistent with the March quarter results. A further 43% of business brokers felt that prices were a little lower and only 14% felt that prices were significantly lower (source: Australian Institute of Business Brokers Members survey – June 2012 quarter).

On the whole, if the market was performing poorly, then you’d have to wonder how and why it’s possible that any businesses are achieving higher sale prices in two consecutive quarters!

Again, you’d need to assess the circumstances for each comparable business sale and compare like for like. For example, the:

  • attitude, confidence and motivation of the seller/broker in selling the business;
  • amount of marketing exposure of the business opportunity;
  • nature and experience of the buyer;
  • quality of the presentation, marketing, experience of the seller/broker etc.

THERE HAS BEEN AN INCREASE IN THE SUCCESS RATE IN SELLING BUSINESSES

According to the same survey, 59% of business brokers recorded about the same success rate or higher compared to the previous quarter (source: Australian Institute of Business Brokers Members survey – June 2012 quarter).

Again, you’d need to assess the circumstances for each comparable business sale and compare like for like. For example, the:

  • attitude, confidence and motivation of the seller/broker in selling the business;
  • amount of marketing exposure of the business opportunity;
  • nature and experience of the buyer;
  • quality of the presentation, marketing, experience of the seller/broker etc.

 

MORE GOOD BUSINESSES FOR SALE WILL FLOOD THE MARKET

Baby Boomers will be looking to retire in large numbers around the same time and this will heavily saturate the market with good businesses for sale. In the eyes of a buyer, retiring business owners will have a genuine reason for selling and will likely have a good business to sell as they would’ve worked hard towards building their nest egg for retirement.

With more good businesses for sale available, it will become more difficult to secure the interest of buyers (as discussed earlier).

SELL YOUR BUSINESS WHEN BUSINESS IS GOOD

Buyers need to see that your business is busy, making money, and generally moving forward. They’re unlikely to want a business that is losing income, its competitive advantage or any of the things that attracted them to the business in the first place. Buyers will value your business more highly when they perceive that your business is in a position of strength, and other buyers want it! Increased competition will help to drive the sale price up!

SELL YOUR BUSINESS WHEN YOU CAN COMMIT TO SELLING

Make sure you can make a full commitment to selling your business.

Like most marketing campaigns you can expect to receive the highest number of enquiries and offers to purchase your business in the opening weeks of marketing. As the weeks and months draw on, you can expect to receive significantly less enquiries and offers to purchase. Once this tapers off you will be in the undesirable position of deciding whether to inject more money into marketing or taking a lower price before you lose all hope of selling the business to a buyer.

So, if you have the choice in deciding on whether it’s a good time to sell your business, consider whether you’re:

  • emotionally ready to sell your business
  • business is ready for sale
  • timing in the supply demand curve is in your favour
  • able to commit the time, energy and money into the marketing campaign

 


In summary, consider your personal and business circumstances and make a decision that makes sense to you on the day. The bottom line is, if you have a choice on whether to sell your business, the best time to sell a business is when it’s doing well.

Regardless as to whether or not you’re ready to sell your business now, you should contact a professional to start preparing your business for sale. A business that is run as if it were for sale every day is more likely to appeal to a buyer who’s prepared to offer you more for your business!

Copyright. This material has been written by BizClassifieds and is not to be used or duplicated in part or full.

Disclaimer: The information provided above is to be used as a guide only. No person should rely on this information. BizClassifieds recommends persons seek their own professional advice, and accepts no liability for any loss or damage which any person or business may suffer arising from any negligence on our part.

Advertisements