In one of my recent posts I suggested that a well-performing business may be very marketable right now, despite the bad economy. Last week I met with an investor who has bought and sold a number of businesses over the last several years. He is an example of a business buyer whose appetite to buy confirms what I previously said: he is in contact with lots of business brokers, and is desperately looking for well-performing small businesses and has the capital to buy them, but is unable to find any that look good to him right now.
The conventional wisdom is that buyers with capital aren’t actively looking right now. From my discussion with business buyers this does not seem to be the reality. The problem is that many of the buyers are still looking for only well-performing businesses, which are more of a rarity in this distressed economic climate.
If you have a good business that is well-managed, and continues to have strong earnings despite the general economic downturn you may be surprised by the level of interest from financially capable buyers that may be achieved. In a good economy there are lots of mediocre performing businesses that cloud the market. In a down economy, if a business is continuing to achieve strong results it will stand out from other business broker listings. A buyer will have more confidence that there is a lower probability of failure with a business if it is doing well despite the downturn. Furthermore, there are fewer places that investors feel confident about getting a decent return on their investment when the recession has punished real estate, stocks, bonds, and mutual funds.
Businesses that may be easier to sell right now are those that:
1. Have at least $1 million in revenue.
2. Have at least $150k in Seller Earnings.
3. Have a diversified customer base so that no one client represents a large percentage of revenue.
4. Maintain or have access to redundant vendors, so that if one of them fails it isn’t devastating to the business.
5. Have level or increasing Seller Earnings.
6. Have strong systems and staff in place.
If you have wanted to sell your well-performing business, but were concerned that it is a bad time to sell, it may be worth questioning this assumption. I would welcome phone calls or emails to discuss your business and situation, and discuss whether or not the time may be right to market your business.
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
