Transaction
Putting a price on business.
BizBuySell.com recently released its latest Insight Report on trends in the business-for-sale marketplace, showing an increase in closed transactions for the second quarter of 2011. While access to credit remains tight, the number of deals completed was up 8 percent over the same period last year.
“We’ve been anticipating an upward trend in the business-for-sale market as more profitable businesses start to become available for sale,” said Mike Handelsman, group general manager, in a press release. Mr. Handelsman also attributed the uptick to business owners who were finally emerging from survival mode and returning to profitability. An industry breakdown of the 1,198 small businesses sold during the second quarter showed that almost half were in the service sector, while 26 percent were in retail, 18 percent were restaurants and 5 percent were in manufacturing.
The small-business economy continues to send mixed signals, with some saying that the recession has not ended on Main Street and with others reporting a surge of confidence among owners of privately held companies. Personally, my favorite economic indicator is the phone in my office, which has indeed started ringing more often with business owners calling to begin the process of a sale or exit. Many business owners have been asking me if now is a good time to sell, a question that I try to answer with as much candor as possible.
If you own a Main Street business — which I’ll define here as an owner-operated business with less than $2 million in annual gross revenue — things are still a bit hit and miss. If your business has performed well throughout the economic downturn (“flat is the new growth”) and is in a stable industry, there’s no reason not to take your business to market. Good businesses sell in any economy, and there are plenty of worthy buyers out there who have been looking hard for businesses to buy.
Businesses that are in the fortunate position of attracting interest from either a strategic acquirer or a private equity group are truly in a seller’s market. While Main Street America has muddled through the recession and uncertain recovery, larger companies and investors have been sitting on great gobs of cash — which they are actively looking to deploy. It used to be that I would only see interest from a private equity group on businesses with a minimum of $2 million in pre-tax earnings. Over the last two years that earnings floor has dropped to $1 million, as good deals have presumably been in short supply and the private equity folks look to do smaller “add-on” acquisitions of businesses that complement one of the larger companies in their portfolio.
Even if you’re on the fence as to whether now is a good time to sell, it is always a good time to start planning for what can be a lengthy and complex process. I’ve had a number of business owners approach me recently about building value in their businesses with an eye toward selling in the next year or two, a topic that I am more than happy to discuss. In fact, the phone ringing and the question of value enhancement are music to my ears.
Barbara Taylor is co-owner of a business brokerage, Synergy Business Services, in Bentonville, Ark. Here is her guide to selling a business.
Article source: http://feeds.nytimes.com/click.phdo?i=b9ce63c6be5976abf8ed7f7876706620
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