Are you asking is now the time to sell or not to sell?
This is the dilemma facing small and medium size business owners thinking about an exit strategy. Potential business sellers face numerous uncertainties, especially in these turbulent times:
- Uncertainty about the asking price: You must get experienced advice on pricing, sale process and structuring deals. The selling price should not be the only motivation for selling. Owners sell their businesses for reasons other than money. Reasons include funding capacity for significant scaling up and new opportunities, desire for a sea-change and retirement.
- Uncertainty about timing the sale: Most sales of small and mid-market companies are driven by personal considerations. It may depend on individual circumstances, but owners must get experienced advice as sale strategy, management and timing are all important. For example should it be marketed by seeking expressions of interest or with an asking price.
- Uncertainty about how to go about selling: This can be so overwhelming that the owner keeps procrastinating. It takes a considerable amount of time and business owners are usually time-poor and must not take their eye off the main game which is driving their business. Sellers often lack knowledge and experience in how to sell a business and therefore discuss the issue with friends, relatives or their accountant, all of whom are probably no more knowledgeable or experienced than the seller.
Are things really as tough as they say?
Despite all the “doom and gloom” commentary, Australian consumers are taking on the new challenges to life during a pandemic and with some optimism we are seeing they realise life probably isn’t so bad after all.
Interest rates appear to be remaining at a record low for the foreseeable future. The local and overseas share markets are largely shrugging off the temporarily depressed economies recognising that governments are continuing to be responsive and provide support and are focusing on re-growth.
Not all industries are depressed and some are showing growth as they cater to the changed business environments, examples include healthcare products and services, information technology, on-line retail, food retailing, manufacturing and wholesaling, transport, postal and warehousing.
But let’s not paint too rosy a picture – companies are indeed retrenching and people are suffering – times are indeed tough, just not as tough as we might want to believe after watching the evening news.
Are you worried it’s not a good time to sell your business?
Depending on your industry and trading conditions now could be a great time to sell a business. Often the number of potential business buyers actually increases in tough times.
Larger SME businesses trading well look for opportunities to grow by buying bolt-on businesses. They see the advantages of growth through product, customer and overall market expansion.
Employees out of work or under-employed often look to buy a business, and a job, where they will have control over their working lives and improving their lifestyle going forward.
As a result of corporate downsizing, the number of unemployed but very qualified business executives increases in bad economic times. It is generally very challenging for a former corporate executive to find a decent job matching their qualifications especially when they are in their late 40’s/50’s, so buying an existing business becomes a very attractive and affordable proposition.
These people are generally very resourceful and experienced in terms of business skills and financial capabilities. This abundance of qualified business buyers tends to counter the downward pressure on business valuations. This phenomenon is more pronounced for small to mid-sized companies that tend to be acquired by individuals generally seeking to buy a business as a job alternative.
In tough times the good businesses really stand out. Sellers are driven to sell for many reasons and good businesses are always coming onto the market.
A word of warning though… Just because it could be a great time to sell, don’t race into it. Preparing a business should not be rushed and we explain some of the important factors you need to consider and do to prepare your business for sale in our blog articles Four important steps to a successful business sale, Preparation is the key to success and succession and A well prepared business for a successful sale.