Believe It or Not – It’s a Seller’s Market

By: Gerry Chadwick – Owner
Sunbelt Business Advisors

There are two myths firmly planted in the minds of business owners right now:

Myth #1 – It’s a Buyer’s Market

Many business owners don’t believe this is a good time to sell their business. For a healthy business, one that has managed to maintain its revenues and profits, or even thrive, in this economy, this is a perfect time to sell.

Sure, there are many businesses that have struggled the last two years, and yes, that leads to a lower price point where buyers can get a deal. However, the opposite is true too.

More than at any time in the recent past we are working with many frustrated buyers who can’t find what they’re looking for – a solid business to buy. Most buyers we deal with are not looking for under performing businesses. Rather, they are looking for profitable businesses, either individuals who want to own and operate the business themselves or companies looking for strategic additions to their core business. As a function of supply and demand, a healthy business will generate a great deal of buyer interest, thereby optimizing price and the time it takes to sell.

Myth #2 – There’s No Money Available to Do a Deal

There is a perception with many business owners who may have an interest in selling that there isn’t money available to get to complete a transaction. Why try to sell now if the buyer can’t get financing for the deal? They don’t want to have to carry the entire deal in the form of a seller note, so they are planning to wait it out until banks are making loans again.

This couldn’t be further from the truth. We have completed a number of multi-million dollar deals in the last year where we have helped buyers secure the needed funding. True, some of the guidelines with banks are more restrictive, but a buyer with 20% down, a good resume and good credit can get a loan for a business with solid financials. Several banks we work with are even making allowances for a soft 2009 if there are indications that the business is recovering in 2010.

Additionally, for businesses with EBITDA over $1M there are many private equity groups looking to make a deal. Over the last two years the lack of liquidity in the market hasn’t allowed for the deal flow needed by these firms. This is causing many private equity groups to look for deals at lower EBITDA points than normal. These firms have a tremendous amount of money that they need to use to acquire businesses that provide a strategic fit.

Bottom line, this can be an optimum time for many business owners to consider selling. There are qualified buyers looking in all categories of business and at all price points. And, there is funding available to get the deal across the finish line.

If you (or someone you know) are considering selling your business, now or over the next few years, take the first step and contact us at Sunbelt Business Advisors. There is no cost or obligation for us to meet and help you to understand whether the time is right, and if not, what you need to do to better position your business for sale.