BizBuySell.com, last month, announced the results of its annual Business Buyer-Seller Confidence Index, an indicator of small business buyer and seller sentiment in the current marketplace.
Here are some key results:
- Business owners believe now is a good time to sell.
- Potential buyers are skeptical of current asking prices.
It’s quite common for owners to believe that their businesses are worth more than what potential buyers might be willing to pay—a big issue for owners looking to sell their businesses.
- Sellers feel more confident that they can successfully exit their businesses; the Seller Confidence Score grew to 62 after two consecutive years at 56.
- The majority of owners (58%) believe they can receive more money for their businesses this year than they could last year.
- And more than 90% were optimistic enough to say they will be able to achieve the same or higher sale price next year.
What does all of this mean?
With the number of businesses going on the market increasing as baby boomers seek retirement, the competition for buyers and multiples is going to continue to heat up.
And business owners who are looking to sell need to understand what buyers and lenders are looking for.
Now, more than ever, owners need to be prepared and put their companies in the best possible light. While sales figures are important, there are many qualitative factors that make a business attractive to a buyer, which we cover in “How Small Business Can Replicate the Big Business Seller's Advantage in Today's Market.” Owners need to consider all of these factors and understand what their business is worth from the point of view of prospective buyers.
We know from experience that buyers will pay more for quality companies -- companies that demonstrate the specific attributes buyers are looking for. If you work hard to grow and improve your business, buyers will be willing to pay more for it. Planning in advance will give you time to improve your business and maximize its value.
Key Drivers of Business Value
In our book, Cashing Out of Your Business – Your Last Great Deal, we discuss how owners must be focused on keeping their businesses competitive and growing in order to ensure that the value increases and their largest asset is protected. We also discuss 8 key drivers of business value:
- Increasing Revenue & Profits
- Growth Potential
- Clean Financials
- Solid Management Team
- Quality Products & Services
- Strong Sales & Marketing
- Low Risk
- Systems & Processes in Place
Minimizing the risk potential in your business takes time, effort, and planning, which is why we recommend you begin the planning process at least 3 to 5 years prior to your desired transition date. By staying vigilant and clear, you will know how to maximize the value of your business and when to sell (either internally or externally) so you can tap into the value, realize your gain, and get enough money to achieve your goals!