Today there are between 10 and 15 buyers for every business for sale¹.
Needless to say, it is very much a seller’s market when it comes to established private businesses. The growing number of people interested in buying a business means more activity and more competition per listing- all of which favors the seller. Imagine listing your business for sale and having multiple people competing for the price, the terms, and the overall structure of the deal.
A large population of buyers exists around the world that want to buy into established, private businesses- and why not?
These businesses have thrived through thick and thin, and have lasted the test of time, all while continuing to generate returns for stakeholders. Who wouldn’t like own such a business?
While it is a seller’s market, sellers must remember that while buyers are plentiful, they are also sophisticated. Sellers need to ensure they have their businesses in order and ready to sell if they want to maximize the selling price (stay tuned for our blog on how to get your business equipped for the market). Ultimately, the goal for both parties should be a smooth hand off to the buyer from the seller.
Buyers, on the other hand, need to show that they are qualified to purchase a business. They need to be able to show that they have the appropriate funds to buy the business outright (rare) or can obtain financing. The idea of qualification, however, extends far beyond the world of financial statements. In order to successfully run the business post closing date, prospective buyers must understand the business through-and-through, understand the opportunity it presents, and understand the events and timing aspects of the transition period.
An unprepared buyer is equally as bad an an unprepared seller.
At the end of the day, neither side wants to waste time or money. So before you begin the buying or selling process, make sure you are serious and that you are ready.
When both parties are serious and organized with their intentions, the sale becomes a win-win scenario. The value of the established business is maintained and passed on, the seller gets an equity payoff, and the buyer gets the fruits of established and ongoing revenue from day one. Existing customers, suppliers, processes, networks, and the items that make up the brand itself will also follow the new owner.
More and more people now realize the financial and intellectual opportunities that come with buying an established private business. There are many great opportunities that exist for buyers to find excellent businesses and for sellers to maximize their return on investment by creating and building a strong and valuable business.
This post is not a knock against startups. Who does not like a startup? Daring, dashing, and brave by nature; many have gone on to change the world for the better. But the reality is, they are not for everyone.
The point is: when it comes to cash flowing, revenue generating, financially healthy entities, a lot of people lean towards the stability of established private business. This asset class has often been overlooked as being a ‘smaller basket’, but this is far from the truth. Private companies hire just as many people in the United States as public companies². Many of these private companies are established, small to medium sized businesses.
A burgeoning population of Millennials coupled with international appetite for American investment makes the pool of able buyers plentiful. The connectivity of the internet created a worldwide competition for these valuable assets. The time to sell your business is now.
¹ Tresle, Inc. Data & The Business Buyer Resource Center