InSight

Exit and Growth Strategies for Middle Market Businesses

5 Reasons the Timing is Right to Sell Your Business Now | Part 1

By Brian Ballo | Mar 26, 2014

watch on armThis blog post is the first in a series of 5.

Business owners inquiring whether the timing is optimal for obtaining the highest price for their business, often start by inquiring: “What are business valuations in the market today?” EBITDA multiples provide a quick thumbnail answer to this question.

However, just focusing on today’s industry numbers, does not enable a business owner to evaluate the risk of whether the business will be worth more or less in the future, as compared to selling the business now.

Savvy business owners, who are attuned  to macro factors impacting  business valuations, such as the aging population, financing terms and tax reasons, understand  that several conditions  exist today which support  selling your business in 2014.   In addition to  these  macro factors, the  question  of timing comes down to whether selling the business is strategically beneficial for the business, given its life-stage, as well as compelling personal reasons why it makes good sense for the business owner to sell.

1.  Due to Aging Boomers, the Supply of Businesses for Sale Will be Increasing

In 2014, as the nation completes its climb out of the Great Recession, more businesses are being sold, mainly because the valuation gap has narrowed between more realistic Sellers and the number of competing Buyers. The larger trend, however, is the massive generational shift in wealth that  is underway, as hordes of boomer business owners are motivated to retire.

In the next 5 years, 40% of family-owned businesses in the United  States will be sold, due to baby boomer  retirements. By 2015, the boomer’s sale of their closely held businesses will create nearly $5 trillion in liquidity.

Most M&A professionals view the tidal wave of baby boomer retirements resulting in a potential glut of businesses coming on the market. This mounting  supply of businesses for sale, means downward pressure on valuations for years to come, such that valuations may never return to pre-recession levels. When that tipping point may occur is not  known.  What is known is that every day for the next 15 years, another 10,000 baby boomers will turn 65.

Posted by Brian Ballo.

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