There are a number of cyclical factors that affect the optimum time to sell a business. Of course, is the business doing well? Are the revenue and sales trends upward? Does the future look bright? Other factors include the motivation and industry focus of buyers, as well as, their funding rates and availability.
Currently (2017), the private equity buyers are numerous, well funded with unused cash, and a hungry appetite left over from the slow years of the recent recession. This coupled with historically low interest rates and an easing of commercial borrowing make the demand side of the transaction very favorable to a seller. IF the potential seller’s business is preforming well then now is a great time to sell. Performing well means are the business’ earnings growing from increasing sales, are the continued growth opportunities likely and evident, and are the product or service margins not contracting. When these factors are inline the seller’s representative is in a position to sell the business on the present and also on the near term future rather than on a historical earning formula which includes recessionary years that would reduce the sale price.
An accomplished business brokerage consultant like The Montana Group (www.montanagroup.com) will know of the best method for selling the business. Occasionally, the most advantageous buyer is a company within the selling company’s focus. This is known as a strategic buyer as there are strategic reasons to be buying the business. While this seems a logical place to negotiate, these buyers are often not aware of the current rates for purchasing a business and thus their offers are deficient. The other type of buyer is the financial buyer who is interested in buying a good business with a definable upside and can be purchased at a price that is consistent with the cash flow multiples currently paid for such companies. The Montana Group does not charge a retainer so it’s success-based only fee is motivating.