Making the decision to sell your business because of health, retirement or purely for a change in direction can be a challenging one. However 2016 is shaping up to be a good year for selling a business.
The idea of owning your own business is more of a reality than ever before
I have been involved in the sale of over 1,000 businesses and I have never seen as many active buyers in the market as we are seeing right now. Here is why I believe 2016 could be a great time to achieve your sale and maximise your sale value.
Greater funding for business buyers
Low interest rates have meant that global economies are regaining confidence. This confidence is reflected in low interest rates, making finance for buying a business is far more accessible than in previous years.
Many high street lenders have lowered their capital requirements from buyers from as high as 75 per cent for goodwill purchases to as low as 20 per cent in some cases. This means the cash a business buyer now requires to lend is less than pre-recession.
As a business seller, you may choose to follow the growing trend of business owners prepared to sell using “owner financing”. Over 25 per cent of sellers in 2015 said they would consider this method. By allowing a buyer to purchase your business over a staged period (up to five years in some cases) you will introduce more eligible buyers to your business and therefore maximise the valuation multiple.
More genuine buyers in the market
The idea of owning your own business is more of a reality than ever before. The growing popularity of “shop local” campaigns and the awareness of small businesses in general has meant that more people are taking their futures into their own hands than ever before.
Being an entrepreneur is far more desirable than ever. The huge amount of support provided by the government and blue chip companies (American Express and Small Business Saturday for example) for small business means more awareness and acceptance that “anyone” can own their own business.
Read more about companies that took part in American Express initiatives such as Shop Small:
- Customer convenience sees fine food and drink retailer win big with late openings
- The small business approach to thinking big on customer service
Many professionals such as accountants have become active in the lookout for their ideal business. Many have large savings from a long period of their careers and are prepared to pay good money for the right business. Many of the buyers in this category are cash purchasers which reduces the uncertainty of relying on third parties such as banks.
We are out of recession and looking good
The economic forecast is positive across the globe and this has resulted in increased consumer confidence. This optimism generally means that many businesses for sale are healthier than in previous years and this should result in a greater valuation multiple. More buyers should also mean a quicker completion of your sale.
The baby boomer population is fast coming up to retirement age and it is expected in the next few years that there may be an influx of businesses on the market, possibly more businesses for sale than ever before as they look to retire. As with any supply and demand, if there are other business owners competing for your buyers then you may end up with a lower valuation multiple.
The necessity of your business sale will always dictate when you decide to sell, however if you are driven solely on the best price then 2016 may be the year where your stand to achieve your maximum sale value.
Sean Mallon is MD of Bizdaq.