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How Do I Sell My Business?

 

Selling a Business in a Down Economy

Selling a business in a down economy? It may not be the best time, but some distressed sellers don't have a choice. In this article, we discuss a few important things to consider before you decide to sell a business.

You might think, as a business owner, that right now is the wrong time to sell your business.
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The nation's economy remains shaky, job losses continue to mount and finding a customer willing to pay full price for a cup of coffee is elusive.

More to the point, sales of businesses have fallen sharply this year. A survey of closed deals reported to BizBuySell.com found a 36 percent drop in transactions during the first quarter of 2009 as compared to the same period in 2008.

So why might you consider selling your business now?

Potential buyers are plentiful. And many are motivated to change their employment situation.

"The number of buyers we are working with compared to the same period last year is up by a factor of three," small business brokerage expert Domenic Rinaldi writes in his recent Is Now a Good Time to Sell a Business? post on his Biz Broker Journal blog. "If your business has solid fundamentals and you have a plan, this is the time to talk with a professional intermediary. For example, our firm currently represents a B2B services business that has had flat sales the past two years and slightly fluctuating cash flows. This business has received five offers and this should result in an attractive exit for the owner."

Economic recessions have historically led to innovation. That can come from businesses that use a slower sales environment to study new opportunities and it comes from recently unemployed workers looking for greater work satisfaction--they can bring a fresh perspective and new ideas to your business.

During a recession, "companies that continue to focus on innovation have a rare chance to create substantial space between themselves and their competitors," writes innovation consultant Scott D. Anthony for HarvardBusiness.org. "Those that don't will fall further and further behind."

Of course, selling a business in this economic environment is challenging even if a lot of people are interested in kicking the tires.

Here are some factors keep in mind if you're thinking of selling your business:

  • Have realistic expectations of what your business is worth. Experts like Rinaldi can help determine a price, but don't expect a premium right now.
  • If you're uncertain about selling, don't. Your business might be the culmination of your dreams--step away when you're ready, not before.
  • Have the right team in place to help you sell. That can include a tax advisor, accountant, financial planner and other professionals to provide assistance. For more information, see our article on choosing the right team to sell a business.

Traditional financing remains tight but Rinaldi suggests in his Biz Broker Journal blog that business owners explore financing a deal themselves. "While there are risks associated with this financing strategy, there can be significant upside," he writes. "For example: interest rates of up to 10 percent, a first secured position, deferred and potentially lower taxes, and faster transaction times."

If you're ready to sell, seller financing could be the key to closing a deal.

"Buyer interest is up, but they don't have the cash they had a year ago, and the availability of capital from banks and other lenders is still significantly depressed," noted Mike Handelsman, general manager of BizBuySell, in a recent story on selling a business published by CNNMoney.com.


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