We are well into 2024, but as always, a new year can bring new questions. How is the market looking? Is it a good time to sell a business? What should I know? We’ve turned to our experts – the Calhoun Companies team members themselves – to let us know what they’re hearing from business owners, lawyers, CPAs, and more.
What are you hearing from people looking to sell a business in the near future?
“In general, businesses have recovered or improved post pandemic, but were just starting to normalize in 2023. Hiring/retaining qualified and hard-working employees can be tough in the current market. After the turmoil of the past few years, many business owners are ready for a change or seeking retirement.”
“’I am unable to find anyone in my family or business that would like to purchase it. How can you help me?’ This is a common situation for business owners looking to sell.”
What are business buyers looking for?
“Buyers want high margin, low overhead, minimal staff and scalable businesses. Manufacturing, distribution, and E-Commerce are strong industries. There’s also been an uptick in other sectors due to new SBA guidelines allowing buyers to have multiple SBA loans (as long as they are different industries – SIC codes).”
“Prime businesses have motivated sellers and strong cash flow. They also have a nice mix of assets (real estate, machinery, equipment, account receivable, etc.)”
“Buyers want solid cash flow, to control their destiny, and to find good opportunities.”
“Buyers are looking for a business that has solid infrastructure in place so they don’t have to work the business as hard.”
Are you seeing trends around the types of businesses sold?
“Liquor stores are popular again (likely due to COVID benefitting this industry). Lifestyle businesses are also popular as more people leave corporate America and want to do something they enjoy (breweries, Dog Daycares, Event venues, etc.). Service Businesses that benefit from the aging population are also popular (Health Care, Assisted living, accessibility services, etc.) Businesses with Cash Flows north of $500K are very popular due to their ability to afford debt and pay an owner salary.”
“Strong cash flow and seller discretionary earnings bring faster and more reliable sales.”
Are there any concerns around financing a business sale?
“It appears banks are getting tighter on some of their restrictions and higher interest rates can impact deal structure.”
“New Small Business Administration rules and regulations allow for more buyer and seller options involving percentage ownership, term, and Loan to value. Interest rates have been on the rise recently and that can have negative implications for a buyer’s motivation.”
Are you seeing a lot of Baby Boomers looking to finally sell their businesses?
“Yes, I would say that over half of our clients are baby boomer age. I only see that number growing in the future.”
“Yes, that is primarily what I have been seeing hit the market in my area.”
What are you hearing from business owners? Are there any concerns around the state of the economy?
“The economy and employee market are the main concerns for sellers. Higher inflation makes it hard to stay competitive and profitable for some small business owners.”
“Business owners are starting to voice concerns about current political policies and don’t understand where things are headed.”
“We’re hearing concerns around inflation and rising interest rates.”
What is the most common reason individuals are looking to sell a business?
“Half of sellers are looking to retire. Changing their industry or seeking a different career is another 25-30%.”
“Looking to retire.”
“Other than retirement, challenges associated with staffing their business.”
While some business owners are expressing concerns, the bottom line is that solid businesses with good cash flow will always be in demand, regardless of politics, economic forces, or whatever else the world might throw our way.