A question I was asked last night was “how is the economic downturn impacting business sales?”
Let me give you my general assessment of the current business sale environment, but also share with you how you can take advantage of the downturn to possibly achieve a higher sales price for your business.
Conventional wisdom may be that with the economic recession there probably aren’t many business buyers out there. However, that’s not entirely correct. The reality is that there are many people out there who have come from high-level employment careers who have accumulated significant assets but now have either been downsized or have decided that they would rather be a business owner than having the uncertainty of being an employee. There is also a lot of fence sitting right now. People’s discomfort with real estate and publicly traded securities are leaving them on the sidelines looking for an investment that promises security, control, a decent return, good cash flow, and stable employment.
In the current market, well-performing businesses that are moderately price will be easiest to sell, along with those that have had strong past performance but have had some decline but where a seller is willing to give it up for a low price. A very well-performing business is a rarity right now, so if you own one it may be more marketable than in a good economy, if professionally marketed. However, if your business has more modest performance it may not be the best time to sell. Many buyers have become far more conservative about what they are willing to pay for a business due to uncertainties about the general economy. However, this will pass when the economy starts to recover.
Back to my blog post headline – how can you use the economic downturn to achieve a higher business sale price? OK, I’ll admit – this is a longer-term plan, but here it is: there are many changes a small business owner can make to their business that will make it more marketable and valuable to business buyers. Yet, often the types of changes must be implemented a couple of years before a sale in order to have an impact. When there is less business during a recession it is an ideal time to make changes.
So how do you figure out what type of changes should be made? I would suggest hiring Codiligent to perform a very comprehensive business evaluation. Upon completion of that evaluation Codiligent will help you understand issues that may impact marketability and value and provide suggestions on changes that have a high probability of impacting marketability and value for a sale 2-3 years in the future. For $3,500 you will get a 40-100 page analysis of the business, an opinion of its current value, suggestions for improvements that will have a positive impact on marketability and value, and objective information on how certain changes may impact the business’ value. Furthermore, the types of changes that will be suggested may lead to greater productivity and cash flow. To get more information on a business evaluation contact Eric at Codiligent at 503-535-8817 or E@codiligent.com
Codiligent Business Brokers - Portland, Oregon based business brokers representing sellers of businesses with $500k – $20 million in annual revenue. To schedule a free consultation to discuss the possible sale of your business you may contact Eric Williams at 503-535-8817 or E@codiligent.com
