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 six reasons why now is the perfect time to sell your business:
- Companies are receiving better valuations than ever before. Due to the steadying economy, there are more buyers than ever before. Once the tide turns, it will be harder to get premium prices. Strategic buyers have record levels of cash on hand, and private equity firms are continuing to raise money as well. Now’s the time to “get while the getting is good.”
- It’s a seller’s market. By 2020, it will again be a buyer’s market, and businesses will flood the market as more baby boomers retire. 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.
- Chance of Recession. Since 1950, the average time between recessions has been 7 years. 2015 was the 7th year since the start of the great recession of 2008. Reduce your risk by selling before the next recession.
- Low interest rates, at the moment. 2017 could be the year interest rates go up. As interest rates rise, so does the price of capital – leading to lower valuations.
- Three years of profit. With the recession in the rearview mirror, businesses have had the chance to recover and are in a position to show 3-4 years of positive growth.
- Business is cyclical. Sell high. Sell when things are swinging upwards. Wait, and it may be too late.