Selling a business successfully requires a number of factors, not only related to the quality of the company and the offering terms, but also the external influences working in the marketplace. Keeping records California business sales stats (the BizBen Index) has shown that one or a combination of the below factors greatly influence how many businesses are sold in California each month.
Selling a business influences include:
1. Holidays or life events: The Christmas celebration, or a milestone birthday of a seller, are examples of occasions that either can speed up or slow down the selling process. Holidays and other diversions that involve family events, often interrupt the marketing effort or delay scheduling the completion of an agreement. But sometimes the reverse is true. An owner who wants to sell by the end of the year, or before his daughter graduates from college, will be motivated to push for quick negotiations, a short due diligence period and a closing date scheduled ASAP.
2. Job market: Corporate downsizing in a community almost certainly will put demand pressures on the local selling a business market. While most people out of work seek employment elsewhere, there are entrepreneurs among the newly unemployed who plan to buy a business for sale.
3. Financing availability: The recent financial meltdown offers a clear case study of how a shortage of funds from lenders can negatively impact the demand for small and mid-sized businesses. The slowdown in volume of businesses changing hands in late 2009 and through much of 2010 was a direct result of the shortage of money needed to complete transactions. Loosening of the purse strings in the past few months has resulted in a more robust business sales environment.
4. Stock market and investments: When faced with alternatives, investors put their money where they expect the best combination of high return and low risk. But these motivations don’t always result in the same behaviors. A booming stock market influences some entrepreneurs to divert excess funds into corporate equities. For others, it’s a chance to profit by selling current investments and--encouraged by the more positive economic outlook--to enter the business for sale marketplace.
5. Real estate equity: The decline in home values and the pressures it put on the economy during the past three years, influenced many would-be business buyers to “watch and wait.” When entrepreneurs had substantial home equity, they were far more tempted to use their resulting borrowing power to purchase a small business for sale. As equity disappeared, however, individuals not only had less financial ability to make a business purchase, they also became less positive about their chances of success owning a company in a troubled economy.
6. Consumer sentiment/confidence: For the most part, someone considering the purchase of a small or mid-market business will delay moving forward on that idea when polls show that most people are worried about the economy. That's not the time to get into a retail company or even most business-to-business enterprises. For bargain-hunters in the business for sale marketplace, however, a decline in consumer confidence signals the possible opportunity to acquire a sound business at a "distressed" price.
7. Businesses for sale supply: Like any demand and supply dynamic, the availability of good businesses for sale strongly influences the market, the prices, and the likelihood of finding a buyer. During a healthy economy when business owners enjoy strong profitability, business buyers find it more difficult to find a desirable company for sale and to get sellers in agreement on prices that can easily be paid off. It's often the predictions of a sagging business climate that motivates more owners to quickly implement their exist strategies.
8. World events: Much like the stock market that reacts to news about changes to the political landscape and natural disasters, the market of small businesses for sale can be influenced by major events--even those events well outside of the business world. A retail business owner, for example, may delay her plans to sell if she concludes that a natural disaster in a nearby community will hurt the marketability of her enterprise for a while.
While it's important to look at the profitability and pricing of a business for sale to determine the chances that a buyer will be found in a short period of time, there are key external factors that can determine the likely success of someone selling a business.
The easy part is knowing some of the factors that can influence the marketplace for small and mid-sized businesses. The hard part is understanding which factors have the most influence at any one time, and exactly how each affects the marketplace. Some business owners do report, incidentally, that by following the BizBen Index and collecting ideas and information from the BizBen Blog pages, they are able to gain insights about how various factors might impact their plans for selling a business.
About The Author: Peter Siegel, MBA is the Founder of www.BizBen.com (established 1994 - 7000+ California businesses for sale), the Director of the BizBen Network and the BizBen Index - which reports the sales of California small and mid-sized businesses - which is updated weekly. Peter Siegel can be reached direct at 866-270-6278 for consultations.
|Helpful Resources To Assist In Selling And Buying California Businesses|
|Janet Carrera - Escrow & Bulk Sale Services - SF Bay Area
Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.
|Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence Services
Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 805-428-2063.
|Elizabeth McGovern: Escrow Services - SF Bay Area
McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.
|Brad Steinberg, Broker - Laundromat Specialists
PWS is the leading laundromat broker in California. Since 1968 PWS has brokered over 2,500 laundromat sales. With over 90 employees dedicated to the coin laundry industry, PWS has 18 licensed agents, a 3 person in-house finance department, 10 service technicians and a 20 person parts department.
|Mark Chatow, Esq.: Legal Services For Buying, Selling Businesses
Mark has a broad range of small business purchase & sale experience from analyzing potential acquisition targets to successfully guiding buyers and sellers through the purchase & sale of small businesses. Mark can assist with contracts, negotiations, legal matters, etc. Reach Mark at 949-478-8393.
|Ranvir S. Sandhu, Esq. - Legal Services For Buyers And Sellers
I've worked at top Bay Area law firms and have extensive experience with business entity formation, mergers, dissolutions, conversions, employment matters, including experience in reviewing and negotiating transactional documents such as leases and purchase agreements.
|Helen Yoo: Escrow & Bulk Sale Services - Southern California
New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.
|Diane Boudreau-Tschetter: Escrow And Bulk Sale Services
California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.
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