Is it a Buyer or Seller Market in Selling Your Business? Not a simple question and reflects some specifics to your particular deal but there are some macro stats you should consider if you are considering selling your business
At present the sales price to asking price gap is tight. This reflects low inventory and high demand making it, in essence, a seller’s market. So, if you were looking to sell an environment like this is ideal. The following image accurately reflects the trends we have seen for the several quarters.
The next data point is multiple of Cash Flow. Again the tight inventory has driven multiples up once more reflecting a seller’s market dynamic. The term multiple is bandied about and sometimes confuses parties but in general buyers pay a multiple of the cash flow or profits of a business. When it is observed that multiples are going up it reflects a number of factors not the least of which is the availability of lending and cash for deal flow.
So, is everything rainbows and unicorns? No….in small business we generally don’t pay attention to interest rate hikes at the fed but note….in the last 120 days the rate has gone up 3 times. The net effect will be a tightening of lending and consequently a shift of the market from sellers to buyer. When that slow down occurs the optimum selling dynamics above will dissipate. Funding availability has two impacts in the small business market. The first is on the larger deals usually north of $500k and into the millions. SBA financing is generally used for this. It should be no surprise that the rates are going up as the Fed rate essentially was zero for the last 8 years of the Obama Presidency. The second will be in the overall economic health of the US. Tight money has an impact across many sectors and will impact the general feel and attitude for investment.
As you consider your exit plan and the possible sale of your business you need to look at these factors and the forecast as well as the time to actually find a buyer and consummate a deal. For more on your particular deal and planning your exit and sale please feel free to contact Michael Shea Senior Business Broker at www.yourfloridabusinessbroker.com or call at 321-287-0349