Portland Business Broker Thoughts

When I talk to owners of businesses that are successful despite the down economy, some will say that they would be interested in selling but that they are concerned about selling right now.  I understand that concern.  While there are definitely buyers for well-performing businesses that are currently looking, the number who are looking is smaller than during good times, and they will tend to look at performance, projections, and valuation more conservatively than in boom times.

I know that many economists believe that when we start to see an economic recovery it will be slow, and at least initially, may not show improvement in employment.  Because of this, many people may not recognize that we are in a recovery when it actually begins.  However, I predict that when we start to have a few months where the general consensus is that we are on the road to economic recovery and stability, even if it appears to be a slow one, there will be an excellent opportunity to sell well-performing businesses.

If you own a business that has strong financial performance despite the down economy, you are in an elite class.  Yet, right now there are fewer people with the access to capital or a willingness to invest capital due to the recession, which limits the number of active buyers.  Also, uncertainty about the economy diminishes the confidence of business buyers that a business will continue to perform well in the future.  This uncertainty, for many, leads to investment paralysis.  Once prospective business buyers start feeling more comfortable about the direction of the economy, more will become serious about buying, may have access to more capital, and will be more confident of being able to achieve necessary returns from their investment.

Once this momentum changes, I believe there will be a fairly narrow window of time that will be an exceptional selling opportunity for businesses that did perform well during the down economy.  I believe that window will last for about nine months after there is general consensus that the US economy is recovering.  Here’s why: most business buyers focus strongly on the most recent 12-months financial performance of a business.  When we get to the start of a recovery and buyers become more eager and motivated to buy, they will still focus on the most recent 12-months financial performance of acquisition targets.  If a business has performed well in the prior 12-months despite the down economy then it will look very favorable in comparison to those businesses that struggled to get through the downturn.  I would expect that many businesses that struggled during the downturn, will naturally start to show significant financial improvement during a recovery.  Once we are 9-12 months into the recovery, the solid performance that a business had during the recession will be less important to many buyers, since they will be more focused on the most recent 12-months financial performance.  This means that after about 9 months of recovery a business that performed well during the down economy will likely be less impressive in comparison to businesses at large that didn’t perform well during the downturn.

Consequently, if you own a well-performing business and are considering a sale during the next few years, I would encourage you to prepare for a business sale now.  This will allow you to take advantage of the nine-month window when it presents itself.  How should you prepare?  Select and start working with an excellent business broker (if under $20 million in revenue) or investment banker (if over $20 million in revenue) to help you analyze, value, and package the business, and develop a marketing strategy.  By the time you interview and select an advisor, compile the information necessary for the business broker to prepare the business for sale it could take 1-2 months.  By doing this now, you put yourself in a position to start actively marketing the business immediately once there are signs of a solid economic recovery.  Please contact Codiligent business brokers if you would like to schedule a complementary consultation to discuss your particular situation.