With only slight increases from the middle of the recession in 2009 to 2012, 2013 saw a major improvement in the number of small business transactions. This was mostly due to an uptick in the economic recovery; strong supply and demand fundamentals; improved lending options; and continued improvement in small business financial performance.
In fact, according to BizBuySell.com, business-for-sale activity rose 56% year-over-year in Q1 2013, 62% in Q2 2013 and 42% in Q3 2013. Additionally, small businesses are bringing in more revenue with improved cash flow and, as a result, the median sale price is the highest the industry has been since before the recession.
But what do all these numbers mean for selling in 2014?
If you’ve been waiting to sell, 2014 might be the year
Many owners spent time and money readying their businesses for sale prior to the economic downturn. However, due to declining financials and a slowing business-for-sale market, these owners placed their plans on hold and decided to wait out the Great Recession for a time when they felt they could receive an acceptable sales price. With the recent spike in transactions, overall improvement in small business health and rise in buyer confidence, it looks like that time is now. This combination of latent buyers and sellers is coming together to create an increasingly strong market and, likely, for some time to come.
So if you were one of those business owners who waited out the recession, but plan to sell in the coming year, here are a few tips to help you get the most from your sale:
- Don’t navigate the sales process alone: Navigating the sales process on your own is quite the challenge. Instead, consider hiring a business broker who can then advise you about how to make your business stand out from the crowd and attract serious buyers. Having worked with numerous owners and spoken with buyers, your broker will know exactly what needs to be done to position your business as an attractive investment to a broad base of buyers who are willing to pay a premium.
- Have all proper documents prepared and ready: Make sure you have the proper financial documents available to show buyers. This helps prove you’re serious about selling and that you’ll be a good person to work with throughout the sales process. Also, having your financial documents organized and up-to-date shows potential buyers you’re on top of things and that they can expect to see few surprises down the road.
Tax returns, accounts receivable reports and expense reports are a few documents buyers will want to see upfront. They’ll also expect to see at least three years of these records to give them a solid background of the business’ finances. Making non-financial documents like supplier contracts or company process manuals available is also beneficial.
- Invest in your business now: Don’t forget about the physical nature of your business, as its appearance will play a big role in shaping how prospective buyers see your business. If you’ve put off painting or renovating the space, now’s the time to do it. Potential owners will be impressed and be more likely to purchase your business if they know these tedious tasks are already done.
Curtis Kroekeris General Manager for BizBuySell.com