Is now the time to sell your business? More than 75 million baby boomers are nearing retirement age, and many of them own businesses. It’s no wonder that we have seen an increase in business sales over the last year. According to BizBuySell, 2013 small business sales were up close to 42% from the previous year, and that trend is expected to continue.
Small businesses are primarily valued based on cash flow. Of course there are many other factors involved, but the key driver to a business buyer is how much cash the business produces. Each type of business has its own unique multiple that is applied to the cash flow to determine an approximate business value. The higher the profit and cash flow, the higher the multiplied value. When profits and cash flow are down, the business value suffers proportionate to its multiple. It’s no wonder then that during the recession business sales plummeted.
Business owners have hung on, waiting for the economy to turn around in order to maximize the return on their business investment. Now it appears the country’s’ growth rate has stabilized, projected to end the year at 2.8%, move up to 3% in 2015 and remain under that until 2020. So waiting for an upturn in the economy does not appear to be a good strategy.
What other reasons would cause you to wait to sell your business? Do you have new products on the horizon that may have a significant impact to your companies sales? Are there any environmental or other changes in your industry that may give you a reason to hold on? Or maybe you want to put away another years worth of income toward retirement. Otherwise, the time to start planning is now. Talk to your advisors, get a free valuation from a business broker and begin preparing your business for sale. There is no time like the present!
Steve Barnett has broad-based experience in small to middle market advisory activities. Prior to becoming a Business Broker, he served as CFO, Controller and VP Finance of both Manufacturing and Professional Service Companies with expertise in the Aerospace, Consumer Products, Banking and Staffing Industries. Known as “The Valley Business Broker”, Steve serves Los Angeles and Ventura Counties. Visit Steve’s website at www.TheValleyBusinessBroker.com.