We are selling fewer businesses this year. It isn’t for a lack of buyers because there are still plenty out there. Mainly it is because many businesses have seen a reduction in sales and earnings, and unfortunately most buyers will not take the chance of buying a business in a downtrend.
Many business owners say, “it is obviously cyclical, and will pick right back up when the economy picks up”. This is most likely true, but often it’s just too much of a leap of faith for prospective buyers. In a purely financial sense, it also downgrades any return-on-investment calculations if a buyer’s investment doesn’t really start paying off for a few years.
If you have a business you wish to sell that has been significantly hit by the economy, the best plan is often to hang in there if you can. You can sell it for far more if you can make it through to the other side and can show some recovery. I know this is easier said than done in many cases. It is extremely tough out there in some market segments and we see some sad and unfortunate situations. I don’t mean to say that you absolutely can’t sell your downtrending business, because there are situations where you can, but as a general rule of thumb it is difficult and the price will be low. For example, I have had some calls from buyers that are trying to buy distressed businesses for very little, then wait for the economy to recover.
Instead spending the energy trying to sell, use this time to either improve or cut under-performing operations, product lines and people, and then implement new systems and procedures. You know, those items on your to-do list that you could never get to previously.
On the other hand, I have clients that worry that the growth that they were experiencing is gone and their sales are now flat. In my opinion, flat is good in this economy. Even a slight reduction in sales is not neccesarily a bad thing. For it IS a difficult economy and buyers know that, and flat means the company will continue to produce an earnings stream. For many businesses, flat could also mean a well established business that is likely taking market share from its competitors, and this means that growth will likely follow when the economy picks up.