Sales of small businesses on the rise
The economy is struggling, but sales and valuations of small companies are up, according to the latest data. Have you bought or sold a business recently? Are you thinking of selling? Tell us about it.
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DiggSam: As business brokers, we’re having to be more creative these days in putting together the financing. To get a transaction done now, it’s usually a three part package: (1) the buyer’s down payment of anywhere from 15 to 30 percent, (2) the maximum SBA loan that the business qualifies for and (3) the seller’s note receivable for the balance. In a transaction the size of which you’re contemplating, it’s almost impossible to get done unless the seller is willing to participate in the financing as described above. William Bruce, President, American Business Brokers Association.
NOW is the time to buy if you are interested in owning a business and really affecting your future. I’d much rather be at the at the head of the line passing out pink slips than standing in line waiting to “get mine.”
I am negotiating the purchase of a small business which I valued at $3 million. The problem in the current market is that financing (SBA) for a transaction this size is nearly impossible unless you are already financially well heeled.
Perhaps the authors claim about rising prices at the low end of the market should include some mention of how buyers are financing. If the Seller is willing to carry a note, I’d be willing to pay more, just to have the source of financing available.
I think using a multiple of sales is a very dangerous but understandable approach here(due to lack of good EBITDA/Cash flow or other data).
The real truth is that prices ARE NOT going up, but that sales are going down. Naturally, a seller wants to base their price on a standard multiple of a good year while a buyer is concerned about the future. They end of compromising some where in between.
When the trend line for sales is down, the multiple creeps up some.
For any potential buyers, understand the trend lines BEFORE buying.
Absolute prices for businesses should be going down in an economy like ours.
I see this article as misleading.
In addition to serving as president of the American Business Brokers Association, I am a full time business broker in the Central Gulf Coast area. Business sales here are at a near record pace. And I hear the same news from members of the ABBA all across the country. Small business ownership really does provide the leadership and stability for many of our towns and cities across America, in addition to providing financial security for the business owner and his family. There is no more job security from the large employers. The only job security now is the person looking at you in the mirror!
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We believe trying to pick the right time to sell your business is not unlike trying to pick the right time to sell a stock. The fact is no one knows for sure if business values will be up or down 6 months or a year from now.
If you have a company with a history of earnings, you will receive a good price for your company in any market. Business Brokers always have a database of buyers with money who are looking for business opportunities.
Everyone is aware that many things affect the sale price of the business. Princeton Capital has more than one situation where an owner had an opportunity to cash out, pushed it off because they thought the timing was bad, and never received the value they had in the original offer due to unforeseen circumstances that were out of the control of the owner.
That being said, if your business has been through a declining revenue or profit year, or there is a recent circumstane that has had a detrimental effect on your revenue or earnings, you will get more value if you work through that decline, and sell the company when it is growing or more stable. We have a white paper avalailable shortly at http:\\www.PrincetonCapitalllc.com.
Princeton Capital Strategies, LLC
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