Is the Time Right to Sell Your Small Business? (10/20)

Is the Time Right to Sell Your Small Business?

Recent market gyrations are sending a clear signal to business owners: Now is the time to sell, says Robert Byczek, managing director of Duff & Phelps, LLC. The Chicago-based investment banking and financial advisory firm has been counseling clients that economic and market conditions made 1999 an optimal time to sell. "The smart choice is to move now," says Byczek. He says not since the late 1980s have conditions been this favorable for business sellers.

Although the uncertainty on Wall Street may have dimmed, Byczek says it has not obliterated the incredible alignment of favorable conditions for business owners interested in selling. "The continued strength of the economy, the high level of investment in equity funds and the need for public companies to continue to report increased earnings have all provided favorable selling conditions," explains Byczek. "There continues to be a strong demand for middle-market businesses."

He says these conditions should persist into the near future, but won't last forever. "If we continue to see uneven corporate earnings and world economy concerns, eventually the market will become more unstable, which will cause acquirers to backtrack from deals." Byczek says, however, the business owner who sells now can still take advantage of strong acquisition pricing in the marketplace. He says those businesses in the highest demand demonstrate strong growth and unique market niches and barriers. "Hot sectors include communications, technology, outsourcing, healthcare, and food and beverage," says Byczek.

Greg Gilbert of Corporate Valuations, Inc., a firm that provides business valuations, says obtaining an appraisal is an important step in the process of selling a company. "In a general sense, unless the seller is knowledgeable as to the values of businesses locally, he or she needs help to get the best price for what is usually the biggest assets he or she owns," he explains.

Gilbert says that while the small business owner may currently enjoy better-than-average sale prices, there are other considerations that should be noted. "If the stock market continues to go down, then there will be less money available for investment in businesses, and buyers may be harder to find in the future. That would argue for selling now. But that is, in a very real sense, a bet on the stock market. You are betting on a decline. The opposite may happen," warns Gilbert.

In addition, Gilbert says, regardless of market value, the small business owner should only sell if the time is right for him or her. He explains, "In many ways, selling a business is like selling a house. What good does it do to sell your house at a wonderfully high price if you have to turn around and buy another one at an equally high price? The house sale only makes sense if you are changing where and/or how you live. The business is in the same category. If you want to change your life, sell your business. If not, then the price doesn't matter all that much for most people and most businesses."