Sooner Than Expected – A Buyer’s Market for Buying Businesses
While the economy is expected to remain weak throughout 2009, there will continue to be plenty of opportunities for individuals and businesses in a position to buy, according to a recently released survey.
The report, published by the International Business Brokers Association, found that 61 percent of the survey participants, professionals involved in selling businesses, believe that more businesses will go up for sale in 2009, while 66 percent say they will sell more businesses this year compared to 2008.
This is no surprise. In April 2008, just nine months ago, Inc Magazine published “The Most Valuable Businesses in America” issue, which spelled out the Seller’s market that has historically existed but would change as baby boomers started retiring. So, we have, indeed, been anticipating the change of the business-for-sale marketplace. But it was predicted to occur steadily over the next decade. Economic turbulence has accelerated the natural process.
“While the economy has put a damper on business, the continuing trend of baby boomers looking to sell and retire will provide opportunities for potential buyers,” said IBBA Chair Andrew Cagnetta. “The survey of our members indicates that money will continue to be tight and the number of sellers will outpace the number of qualified buyers.”
The survey also found that in a buyer’s market, purchasers are more selective, so it’s important for sellers to make their business more attractive to buyers. Improving cash flow, updating documents and records and determining the company’s actual worth to make the business more attractive to a potential buyer is key to getting the business sold, it said.
Not only is this important for those owners of small businesses who are considering their exit, now more than ever, it is essential to the economic vitality of our country that these firms successfully transfer to new ownership. The estimated 25.8 million small businesses in the United States have a huge impact on our economy. Outlined below are powerful statistics that speak to the importance of the continuity of these enterprises. Small businesses —
- Have generated 60 to 80 percent of net new jobs annually over the last decade
- Employ 50.6 percent of the country’s private sector workforce
- Represent 97 percent of all the exporters of goods
- Represent 99.7 percent of all employer firms
- Generate a majority of the innovations that come from United States companies
Source: U.S. Small Business Administration
The survey of more than 1,750 International Business Brokers Association members showed that more than 37 percent believe the economy will be down significantly this year and another 29 percent believe the economy will be down slightly.