Timing The Sale of Your Business: External Factors

Is it time to sell your restoration business?As
discussed in The 5 Stages Of The Business Lifecycle, it’s clear that the Accelerated Development Stage is the ideal time to sell your small business. However, you also have to consider external factors when timing your sale or you may miss an opportunity to sell high.

Case Study Of An Owner Who Missed The Boat.Of An Owner Who Missed The Boat.

In late 2007, I had a meeting with a Florida business owner who was in his early sixties. At that time, his revenues were over 4-million. After conducting an evaluation, I told him I was confident his business could sell for $2.7-million.

Since he was close to retirement age, I advised him not to keep all of his eggs in one basket. “Sell your business before it peaks,” I said. “Then diversify your proceeds into safer holdings.”

Unfortunately, he was convinced I was pressuring him to make my commission. He politely replied, “No, thanks.” He told me he was certain his business would continue to grow for a few more years making it even more valuable.

He was wrong.

When the economy tanked in 2008, his numbers plummeted. By 2009, he tapped his personal savings to keep the business afloat. By 2011, he was working 80 hours a week to stay in the game but things
went from bad to worse.

By late 2012, at age 67, he called to announce he was ready to sell.

I had to deliver the bad news. After over three years of deep revenue decline, his business was essentially unsellable. I told him to save on whatever commission I might make and advised him to call his competitors to see if they were interested in buying his business.

In early 2013, he closed his doors and laid off his employees. All he had to show for a lifetime of work was the $450,000 he made from selling his equipment. Missing the boat to sell his business for $2.7-million was a devastating experience for him. Don’t make the same mistake.

Three Reasons Why 2016 Is A Good Time To Sell.

Law of Supply and Demand.

Acquisition experts predict the growing U.S. economy will increase the supply of businesses for sale through 2020. This will create a “Buyer’s Market in which sellers will be expected to lower their asking price.

Low Interest Rates on Acquisition Loans.

When the cost of borrowing money is cheap, buyers are willing to pay more for a business. But, as the economy continues to strengthen, interest rates are bound to rise. When buyers have to pay higher interest on acquisition loans, they tend to lowball their offers.

Retiring Baby Boomers.

Every month for the next 15 years, 250,000 Boomers will turn 65. Even more amazing, 9 million of the country’s 15-million business owners are Boomers. If you wait too long, you’ll be competing against millions of Boomers looking to cash out.

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Gokul Padmanabhan

Written by Gokul Padmanabhan

Gokul Padmanabhan has devoted the past 15 years to buying and selling businesses, much of that in the restoration industry. His partnership with RESCON Business Brokers strengthens his hands-on expertise with a national presence and infrastructure that is second to none.