At one time or another, all business owners ask themselves this very question and often look to their attorneys, accountants, and other advisors for the answer. As any advisor will attest, there is no right answer to this question: the answer lies in the owner’s motivation and market conditions. Unfortunately, many business owners ignore the critical moment where their personal goals and market conditions meet. Current market conditions suggest that we are in a seller’s market, which means that now is the time for the small business owner who is contemplating selling their business to begin talking with their advisors. Below are three reasons why business owners might consider this move in 2014:
Low Interest Rates
One of the most attractive market factors presently motivating sellers are the historically low interest rates. Because of the low interest rates, buyers can now afford to pay more for a business. Although, this could be the year interest rates go up. The Federal Reserve has begun winding down its bond-buying program, and if business owners wait too long to sell, they could be facing higher interest rates.
High Unemployment Rates
On account of high unemployment, there is typically a large volume of qualified buyers actively looking for businesses. Many of these candidates are down-sized corporate executives with money to invest. They are between 35 and 50, have lost their job, and often have no desire to return to corporate America. Ultimately, they want to buy a business to secure their future and control their destiny, and the availability of low interest SBA-backed financing in the current marketplace means these prospective buyers have access to the necessary resources to do so.
Baby Boomers Retiring
Meanwhile, the Baby Boomers, the largest segment of our nation’s population, have begun preparing for retirement, and the small business marketplace is rapidly becoming flooded with the best businesses that have weathered the recession. Experts predict that the largest transfer of wealth in the nation’s history will soon unfold as these Baby Boomer entrepreneurs retire and cash out of their businesses. This, along with the likelihood of rising interest rates, will drive business valuations down in the near future and contribute to a buyer’s market.
A small business owner contemplating the sale of his or her business should devote as much careful planning to the exit as he or she did when launching the business. The majority of the small business owner’s assets are tied up in the business, and the only way to diversify and reduce that risk is to turn the business into cash – and how much cash depends on selling at the right time. Small business owners need to ask themselves the following question: If, by selling your business, you could take your chips off the table and achieve your financial objectives….why would you wait?
If you need help putting together a strategic plan, please contact the Benjamin Ross Group to speak with a business broker who can help you start the process.