I have conversations with potential sellers of automotive businesses every day and, over the years, have been able to determine that one of their most common concerns in developing an exit strategy or in listing their business for sale is whether or not it is a “good time” to sell.
There are a myriad number of considerations when making that big decision. If you are considering a sale in 2015, I encourage you to first read my insider’s guide “10 Mistakes to Avoid When Selling Your Business.” This guide has proven to be invaluable in preserving the peace of mind of my clients by providing clear, concise insight for navigating the complexities of a successful sales transaction.
But for the purposes of this article, I want to address the timing issue so prevalent in my discussions with other potential sellers just like you. In order to do that responsibly, I must first ask:
You are the one who ultimately has to decide when it’s time to sell your business. Over 100 shop owners nationwide who have read past Shop Owner magazine articles about the Sellability Score have invested 30 minutes to complete the questionnaires and receive a comprehensive Sellability Score report. Many of you have scheduled one-on-one phone sessions with me to review the results and gain insight into whether 2015 is the right time to sell, or if you should re-evaluate your situation next year.
Based upon the questionnaire results so far, here is what shop owners like you are currently thinking:
• 21% plan to keep their business for the foreseeable future;
• 21% are thinking of selling or turning over the business to a family member;
• 23% are thinking of selling the business to an employee;
• 33% would like to sell their business within the next year;
• 36% don’t have an exit plan; and
• 6% have previously tried to sell their business.
For those shop owners who think the time is right to sell their business, here are the top reasons that are motivating them to consider a transition:
• 64% want to retire;
• 41% want to pursue other business opportunities or employment;
• 12% are tired of dealing with customers and employees;
• 9% are frustrated and overwhelmed;
• 9% feel they are working too many hours;
• 5% feel they are not making enough money;
• 3% have health issues; and
• 3% need to pay off debts.
Potential family considerations, not to mention your own emotions, along with market conditions, the economy, competition and financial considerations will all factor in while making that decision. So, perhaps the most important question to be honest about is: Are you truly prepared right now?
Waiting for the “perfect time” to sell may be a long wait — a longer wait than is rational. If the recession of 2008 has taught us anything over the past 10 years or so, this rollercoaster economy has ups and downs, bubbles burst, and it is usually only in hindsight that we can see when the best and worst times existed.
While there may be a “perfect time” to sell from an economic standpoint, most shop owners I speak with are equally influenced by whether or not they enjoy getting up in the morning and going to work each day. In my experience, the shop owner who is optimistic and challenged every day to improve his/her business will likely see a growth in sales and profits in 2015, so selling next year at a higher valuation may be the right decision, assuming there is no significant risk of a general market downturn, a new competitor or the likelihood of a health problem.
On the other hand, shop owners who are often frustrated or feeling burnt out will be challenged to find the energy to market to new customers, upgrade their staff and facilities, improve customer service and satisfaction, and expand their services. Unfortunately, many of these shop owners wait too long to sell, and when they have finally reached the motivation level to exit their business, the value may have declined 5%-25% for each year that they passed the “perfect time.”
Keep in mind the sad truth that you may lose as many as 5%-10% of your customer base each year through attrition — relocation, health issues, personal or financial circumstances, competitive issues, death, etc. If you don’t actively promote your business to replace those customers with new ones each year, then your car count, revenue and profits will suffer.
If Not Now, When?
If NOW is not the right time to list your business for sale, NOW is the right time to prepare for the sale of your business. It has been predicted that over the next decade, 6 out of 10 U.S. business owners plan to sell their companies — a noticeable increase over previous years. Many are baby boomers, with an eye on selling their businesses to fund their retirement. With millennials born in the 1980s and 1990s being far less entrepreneurial than their parent’s generation, the number of businesses for sale over the next 10 years is expected to far exceed the number of financially qualified buyers. Therefore, timing, sale preparation and strategy should become much higher priorities for small business owners considering an exit within the next 10 years.
Why? Competition will surge. The sheer volume of businesses that will appear on the market over the next several years means that the reduced supply of buyers will be presented with more options and more purchasing opportunities. Owners who will receive top dollar for their companies are the ones who have invested the time and energy to make their business grow in sales each year and stand out in the crowd. Businesses with declining sales in need of capital investment will take much longer to sell and receive more than their share of low-ball offers.
Driving the point home even further is the number of owners who put off selling their business in 2008 and 2009 due to the down economy. With business-for-sale transactions falling off as much as 28% in 2009 alone, business owners who have delayed their exits may now, in 2015, be poised to enter the marketplace.
BizBuySell is the Internet’s largest and most heavily trafficked business-for-sale marketplace, with more business-for-sale listings, more unique users, and more search activity than any other service. BizBuySell currently has an inventory of more than 45,000 businesses for sale and more than 1.4 million monthly visits. BizBuySell also has one of the largest databases of sale comparables for recently sold businesses and one of the industry’s leading franchise directories.
As a premium member broker of BizBuySell, my own listings can be viewed here.
BizBuySell.com reported last month in its Fourth Quarter 2014 Insight Report that small business transactions reached record levels in 2014 as brokers reported the highest number of businesses changing hands since BizBuySell started tracking data in 2007.
A total of 7,494 closed transactions were reported in 2014, an increase of more than 6% from the 7,056 transactions in 2013, which was the previous record. This marks the second straight year of such strong activity after several slow years during and immediately following the recession. On average, 2013 and 2014 transaction totals are up 55% over the recession and recovery period from 2010 through 2012.
The increasing volume of small businesses changing hands can be attributed to a number of factors. In BizBuySell’s December survey of business brokers, respondents cited an increase in the number of qualified buyers in the market as the top driver of growth. The second most common response was the general improvement of the small business environment, including the availability of Bank/SBA financing. At the same time, retiring baby boomers account for many of the new sellers in the market. In the same survey, more than 78% of business brokers attributed at least a quarter of their closed transactions to baby boomer sellers.
“It was great to see the transaction surge from 2013 carry over and even swell in 2014,” said Bob House, Group GM of BizBuySell.com and BizQuest.com. “Small businesses continue to grow healthier, giving sellers confidence that they can receive a good exit price and buyers optimism that they are receiving a sustainable business. The result is a market with many successful transactions for both sides.
“While 2014 in its entirety was a big year, it’s a good economic indicator that Q4 ended so well,” House added. “The record-high financials are a particularly strong positive for the business-for-sale market and small businesses overall.”
Data Points To Continued Growth In 2015
Even with all the transaction activity occurring in 2013 and 2014, there still appears to be strong supply and demand in the pipeline for 2015. As the economy continues to strengthen, small business financials are likely to keep improving, and sellers will be more confident that they can success fully exit their businesses.
Brokers in BizBuySell’s survey agree as 82% expect transaction activity to increase in 2015 and more than 45% believe final sales prices will rise in 2015 compared to just 12% who believe they will decrease. And while baby boomers were active in 2014, brokers are confident they will remain a driver of supply. Seventy-eight percent of brokers said they expect a larger number of baby boomers to exit their businesses in 2015 than in 2014.
Regardless of when you plan to sell your business, now is the time to start preparing your business for sale. A growing number of business owners are completing the online Sellability Score and receiving their comprehensive scoring report. Those who elect to schedule a free, hour-long phone consultation with me gain additional insight into the concrete actions that will improve the sellability of their business. Improving the Sellability Score will result in more profits in your pocket each year until the “perfect time” to sell, and then make your business stand out in the marketplace and command the maximum sale price when the right time to transition arrives.
“Sellability” is a powerful indicator regardless of whether or not you have any intention or even interest in selling your business today because it points directly to the underlying issues in your business that may undermine its value. Those same issues are probably causing mounting frustration for you — the feelings of being overwhelmed, working too many hours, dealing with inconsistent customer experiences, employee problems and the difficulties of managing cash flow.
To learn more about the Sellability Score, visit my website www.art-blumenthal.com and click on the icon for the Sellability Score. You will then see links to complete both the standardized and the aftermarket-specific questionnaires to receive your free ranking scores and personalized reports.
As a business intermediary with over 30 years of experience in the automotive aftermarket, I can speak your business language. I am actively working with dozens of financially qualified buyer prospects who are in the market to purchase a tire and auto repair center. Overall, I am currently advertising for buyers for more than 150 tire and auto repair locations nationwide, which generate 5-10 qualified buyer prospect leads every day.
Is it time for your business to be listed? It may just be the “best of times,” and is certainly not the “worst of times.” I have demonstrated my passion for helping connect aftermarket small business sellers and buyers and may be able to assist you as well.
Courtesy of Shop Owner magazine