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I have been
getting asked this question quite a bit lately from small
business owners in the
Arizona market and beyond. Particularly in the last few weeks due to
the constant negative news of the declining housing market
and the messy and serious financial crisis that has been
unfolding on Wall ST.
Is now the right time to list and sell a business in AZ?
The short
answer is that it’s a mixed blessing to be offering your
business for sale right now, but in my opinion the positive
factors still greatly out weight the negatives and there are
plenty of qualified and motivated buyers out there.
Some
Positive Factors:
Motivated
Buyers:
I am currently hearing from a lot of qualified buyers in
Arizona (and beyond) that are seeking good businesses to buy
for a number of reasons. Unfortunately one of the main
factors contributing to this increased buyer activity is the
severe down turn in the
Arizona
real estate and home construction industry. There are quite
a few mortgage brokers, realtors, and construction
professionals who are out of job right now, and buying an
existing and profitable business has always been a viable
option to replace a lost job or income stream.
This
dynamic is generally very good news for small business
owners. The more motivated and active buyers there are in
the market place, the better your chances are of finding a
qualified buyer and supporting your asking price.
Less Risk:
Buying an established business with a verifiable track
record is inherently a lot less risky than executing a
successful and income producing start-up. In general, most
new small businesses and franchises are not profitable until
their second year of operation, not to mention that the
majority of them fail with in 3 years. In this currently
challenging economic environment that makes buying an
existing business even more attractive to would be
entrepreneurs who need income now.
Un-Retiring:
Another
factor driving business sales in this market right now (in
my opinion) is that many formally retired individuals are
coming out of retirement to buy existing businesses either
out of garden variety boredom, or more ominously to
supplement or boost their retirement income or nest egg.
Many of these individuals see the real value in buying a
profitable and existing business versus the risks of
starting a new business from scratch.
Some
Negative Factors:
Financing:
Unfortunately the credit crisis and crunch that is currently
plaguing the real estate industry also appears to be
affecting the ability of some business buyers to obtain
traditional bank or SBA financing. From what I am hearing
on the street many lenders are being far more cautious about
financing business acquisitions in this current market,
especially those tied directly to the housing industry.
Also SBA lenders are also facing higher new fees and
tougher rules regarding borrowers using a home equity loan
as collateral. This making the process of obtain SBA
financing harder, more frustrating, and time consuming than
it already is. Any individual or business owner who has been
through this process knows intimately what I am talking
about
With this
in mind, it’s never been more important for Sellers to be
flexible about offering realistic sales terms such as seller
financing to qualified buyers. Statistically almost 90% of
small businesses sold in the USA are done with some form of
Seller financing.
Economic
Uncertainty:
Undoubtedly
there will be a certain amount of would be business buyers
or investors who will obviously perceive this as a time to
best sit on the side lines. That’s fine. Because in my
opinion the market dynamics emerging and currently in place
should continue to provide a steady steam of qualified and
motivated buyers.
Summary:
Although it appears the economy is heading for a slow down
or possible recession, I still believe that there are
plenty of qualified buyers in the market place who need
income and understand the multiple benefits of buying a
established and profitable small business.
Author: Business
Broker Ray Haiber
Please feel
free to contact me if you
have any questions or are considering selling your Arizona
business. I can provide a free (no obligation) and
completely confidential business
valuation, and then you can decide whether its the right
time to move forward listing your business for sale in
Arizona.
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