Global Business Group

- Should I sell my business now?

Business owners ask me this question all the time. There are no general "rule of thumb" answer to this common question, especially in today's economy. It depends on many factors, both personal and business-related.

If you ask me another question: "Do businesses sell nowadays?", the answer is "Yes". However, the marketplace is entirely different than it was five years ago and only those who adopted new rules have their businesses successfully sold.

Let me realistically describe today's business marketplace.

1. It's buyer's market. There are plenty of businesses for sale and very few buyers with money. Those who have money can get unbelievable deals, both in price and terms. When your business is on the market, you're competing with all other businesses in the same price range.
2. Business acquisition loans are still very hard to get, and owner financing is a major component of successful business acquisition. Be prepared to finance the deal. The greater portion of the price you're willing to finance, the greater purchase price you can expect to get.
3. Buyers don't pay much attention to historical business performance before Great Recession (GR). The historical numbers do reflect past history, however have very little to do with what business buyer can expect in the future. Hence, their weight in pricing the business is insignificant.
4. Before GR business prices were inflated due to easy access to money. Banks were throwing money left and right. This situation has changed. Most likely, banks are going to be much more careful with approving loans and their qualification requirements are much stricter.
5. At some point in late 2010 - early 2011, small business owners were hopeful that the economy is turning around and sooner or later the numbers will get back to where they were 4-5 years ago, and at that point they'll be able to cash out their businesses' true value. However, the latest economic development leaves us in a very uncertain place. If the economy will improve, nobody knows when it's going to happen - there are no clear signs. Don't wait for the sales numbers and the business value to come back - it won't happen any time soon, if at all. But what may happen, is that your business will lose the rest of its value, and in two-three years may become worthless. If you need to sell, don't wait any longer. Cash out on whatever value you've got left.

I don't want to sound pessimistic, but real life stories don't always end up like Hollywood movies. You need to fully understand current business market situation and make your own intelligent decision.

Here's a common scenario. The business was running successfully for a number of years, providing very decent living to the owner. During economy downturn the business lost one-half of its revenue and now barely breaking even. The owner needs to sell the business due to (retirement, health issues, family problems, etc...), however can't accept in his heart the fact that the business isn't worth as much as he anticipated. So, he decided to wait and wait, pushing back his life plans, yet the sales isn't coming back. Moreover, the business ate up a lot of owner's savings that were re-invested in the past few years to keep the business afloat.

Should you abandon the ship? The answer is - YES, you should! Otherwise, it will suck out the remaining juices out of you and die, leaving you with nothing. Make a smart move and sell it now. Have professional business broker to appraise the business and be prepared to carry a note. Do whatever it takes to make the sale happen and move on with your life.