Selling a Business: What’s the Forecast?
What are the Current ConditionsWhat are the current conditions for selling a business? Well, in short – “Sunny and warm”. Notwithstanding the hue and cry of the evening news and the editorial page of most mainstream newspapers, most people are pretty optimistic at the moment. Pretty much anybody who wants to work has a job. Even given the disincentives to hire in much of the E.U, unemployment is low. At 3.5% in the U.S., it’s plumbing the depths of of its all-time record low. Wages are up in all sectors across the board – even without minimum wage mandates. The stock market – as measured by the S&P 500 – was up 28.9% in 2019. The tech-heavy Nasdaq was up an astonishing 35.2%! Real estate prices appreciated handsomely, interest rates remain low and lenders are eager to lend. Outside of the socialist paradises of Venezuela, Cuba and the restaurant industry in Seattle, people are generally pretty optimistic. So, given all that good news, what does the market look like for buyers and sellers – and business brokers! – this year?
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The ForecastIn short, “Continued sunny and warm in the near term but the long-term forecast suggests it’s possible a cold front will descend from the north with a chance of cloudy conditions appearing in the United States as we get closer to November.” Such “down-the-road” concerns are no more than mists on the horizon at the moment. There’s still the proverbial boatload of money out there looking for good businesses to buy. We see two sweet spots
1) The Main Street market is active from the increased wealth the stock market has provided to wage earning savers. There are a lot more people that have had long-time dreams of owning a small business and are now in a position to buy one.
2) In the lower Middle Market, we get contacted every week by three or four private equity firms or family offices that are looking for businesses with revenues in the $5 million to $20 million range.
Timing the Peak: a Fool’s ErrandSome sellers who have been reading this blog and watching the stock market have been holding off bringing their business to market in the hope of getting the highest possible price. But trying to time the peak of this market is like trying to time the peak of any market; In a word, it’s “impossible”. And unlike selling stock or gold or collectibles, which can be done is seconds, minutes or days, selling a business takes many months and sometimes years – unless the sellers want to give it away. And even then it’ll take a couple of months. For a year or more stock market prognosticators have been warning that things can’t go up forever. A correction is inevitable. The cause may be the new virus out of China, Iran testing a nuclear weapon, an avowed socialist getting elected president in the U.S. or French bakers striking thus drying up the supply of croissants au chocolat (mon Dieu!) – but one will happen.
Our course, The Basic “How-To” of Becoming a Business Broker”, teaches how to become a professional business broker.