Does the new year represent a great opportunity for a business sale?
In a recent article for Colorado Business Magazine, our President, Jessica Fialkovich shared her insight on the trend of boomer business owners selling to retire. She goes on the mention that, “Looking to the future of small business mergers and acquisitions, nearly 9 million businesses will transition to new ownership as boomers sell for retirement. This growing influx of business listings, which have already been steadily increasing, will flood the normal market volume at five to 10 times the regular inventory.” This statistic is both alarming and exciting as it speaks to a cultural and technological shift that will take place in small business, but it also alludes to the interesting position business sellers will be in if they’re preparing to sell their company as well.
The year 2020 is an optimal time to sell a business in Colorado for a number of reasons including the fact that the seller tsunami has not yet reached its peak and may not until 2024 when most of the baby boomers have reached retirement age. To fully illuminate the answer to the question, “Is 2020 a good year to sell a business?” let’s look at some of the reasons behind why a business owner might consider selling their business.
Is Your Business At Its Prime?
Many business owners don’t consider that a business at its peak is also very well positioned to sell. But if you get down to brass tacks, it makes sense. A business in its prime has good cash flow, good contracts, a large customer base, and a proven business model which are all qualities a buyer looks for in a company for sale. Also the asking price or value of a business is based on its past three years of financial information. So when a business is doing well it will trade at a high valuation, which will bring a good return on investment for the owner. This forward momentum of the business is attractive to buyers looking for business opportunities for acquisition too.
Is It Time to Move On?
Ali Elman, a past business sale client of Transworld’s talks about her experience selling her Denver business on a past episode of The Deal Board podcast. In Ali’s experience, it was easy to tell in hindsight that the timing was right to sell her company, but she did not take the time to check in with herself before the need for sale became more urgent. Often there are indicators that signal it is time to sell your business. Below is a good place to start - it’s a list of questions to ask yourself to get a pulse on your business and situation.
Questions to Ask if You Think it is Time to Sell Your Company?
- Do you have too much on your plate? Are you managing multiple companies, or a business and a career at the same time?
- Is your personal life taking a hit? Has your business take center stage leaving little time to prioritize important aspects of your life like your health or family?
- Have the circumstances of your life changed? Maybe there is a new baby in your family or an ill relative you’d like to spend time with.
- Is your business thriving? Your focus may have moved off your business and left you with limited time and energy to spend managing your company.
Do You Have Time to Focus on Your Business?
It is the rare business that doesn’t require a considerable amount of time and commitment from the business owner. If you’re constantly trying to divide your time between your priorities and your business and your business is getting the short end of the stick, than it may be time to consider a sale. This type of business can be a great opportunity for a buyer who can focus on the company and grow it from the foundation you have been able to build. And this way instead of worrying about your company your able to commit your return on investment to some of the priorities you’ve been focusing on.
Are You Still Passionate About Your Company?
The main reason we see business owners selling their company, outside of retirement, is because they’re burnt out - the business no longer ignites a fire within them and they need a break. We get it, many of our Business Brokers in Denver have been business owners themselves so they know how tough managing the day to day of a company can become. If the daily grind has become just that, a grind, then making an exit from your business may be appropriate. Your exit can represent an opportunity to cash out, pivot your focus and find the next great opportunity to explore your passion.
Is the Market Right for a Business Sale?
Early on in this article we mentioned that the seller tsunami is building. So what does that mean for business owners thinking about a sale? The timing for a sale on this market is right now. Financing options available to buyers are plentiful and the market is not yet overcrowded with boomer business listings for sale decreasing valuations. However, since this trend is picking up speed it is harder to predict how the market will treat sellers in a 1, 2, even 3 years from now.
While there is always a market for truly outstanding businesses, 2020 is a great year to sell. The timing is right for the market and the seller tsunami has not impacted business valuations just yet. If you’re wondering, “Is 2020 a good year to sell a business?” we recommend starting with a broker price opinion to learn what you could receive from the sale of your company in Colorado or simply schedule a consultation with one of our brokers to discuss the sale process.
Rachael Holstein has been the Marketing Manager for Transworld - Rocky Mountain since 2016. Her work experience has been largely focused on business development and marketing in business brokerage, finance, architecture, property management, and information technology. A long time resident of Cleveland, Ohio, she attained her undergrad from John Carroll University and her Master’s Degree from Cleveland State University. In 2013, she relocated to Denver with her husband, Joe, and her furry companions to explore the mile high lifestyle!
If you liked this blog and want to receive more content, just like this, right to your inbox, sign up here!