The National Association of Small Businesses reports that there are a variety of challenges business owners may experience. These, however, are consider to be the top three challenges:
- Economic uncertainty
- The costs of providing health insurance benefits
- Declines in customer spending
Due to these and other concerns, many business owners may decide to sell. It’s interesting to note that when a business goes on the market, there are usually 15 prospective buyers for each business. In 2016, for example, BizBuySell.com’s Insight Report indicated that 7,842 businesses were sold. During this time period, there were also more business owners that wanted to sell than there were qualified buyers. This was found to be the case with 63% of business brokers that participated in this survey.
There were, of course, several reasons that business owners across all sectors wanted to sell during the first quarter of 2017. Retirement was at the top of the list, however, as indicated by the IBBA Market Pulse survey.
The first quarter IBBA Market Pulse survey for 2017 also revealed that 50% of the individuals that purchased a small business were doing so for the first time. Serial entrepreneurs purchased 34% of these businesses.
During the sales process, business owners will have various concerns. The 2017 IBBA Market Pulse survey
revealed that while “cash at close” was the most desirable factor, making sure that their employees were taken care of came after that.
In some instances, according to a 2014 survey, business owners discussed selling with their spouse and/or other family members, which was the case with 32% of business owners. However, just 13% spoke with an attorney. When selling a business, working closely with a business broker can assist with expediting this process. Business brokers have extensive experience with the market and other important facets of the business sales’ process.
Furthermore, a broker can also provide a seller with a business valuation. In brief, the purpose of conducting a valuation is to estimate the business’ current value and whether or not the business is likely to produce a future cash flow. In order to accomplish this task, there are three methods:
- The asset-based approach
- The earning value approach
The market value approach
An experienced broker will be able to determine the most effective approach to use. This will, of course, depend on a variety of factors such as whether or not there is local competition.
In addition to conducting a business valuation to assist sellers, brokers are also able to create a business acquisition strategy for buyers. Furthermore, brokers also provide business acquisition support throughout the entire business sale transaction process.