2011 is a Great Year to Sell a Business

The article below recent appeared in the Wall Street Journal, and it’s extremely relevant to all of you who are interested in selling a business in Atlanta. Many business brokers like us believe that 2011 will be a prime year for selling businesses. If you’re interested in selling your business, please get in touch with one of our Atlanta business brokers.

“Is Now the Time to Sell a Business?

Some 77% of business brokers say 2011 will be a good year to sell a business, according to a survey released last week from BizBuySell.com, an  Internet marketplace for buying and selling small firms. This isn’t a surprising statistic given that brokers have a vested interest in the marketplace.

What’s  perhaps  more compelling is  that 23%  believe this year will not be a good year to unload a business. When asked to explain their opinion, these brokers cited slow economic recovery, lack of financing and low business valuations as the main reasons for their dismal outlook. These are issues that came up in our story, “Businesses Put Up for Sale Smack Into Harsh Reality,” published last year.

Transaction data from BizBuySell indicate that the brokers with the negative outlook may be better grounded in the reality.  In 2010, the total number of businesses sold was 26% lower than in 2008.  Last year’s deals did increase over 2009, but only by 3%.

And the median closed-transaction sale price has continued to drop year after year, from $190,000 in 2008 to $160,000 in 2009 and to $150,000 in 2010.

Coupled with the falling prices of their firms, small-business owners also are grappling with the lack of available financing.

“In terms of the market today, many sellers want to sell – most couldn’t sell in the last two-and-a-half years,” says Mike Handelsman, group general manager at BizBuySell.com. “And many want to buy because unemployment is high and people need to create jobs for themselves. But for all that latent activity to be realized, you need to have financing.”

Indeed, financing trouble is the number-one reason business transactions don’t close today, the brokers noted on the survey. Handelsman says  one way to get financing is if the seller is willing to also extend a loan to the buyer, in what’s called seller financing.

“It’s almost impossible to get  a  transaction to happen today without some level of seller financing,” Handelsman says . “Banks want to know the seller has a vested interest in the business  being successful.”

Business owners who are holding out for better economic and credit conditions in order to sell could wait a long time. An optimistic 7% of the brokers think that transaction volumes will return to pre-recession levels in the next 12 months. Only 27% believe that could happen in 12 to 18 months, and the majority, 66%, say it will take more than 18 months.

BizBuySell didn’t  provide an option for brokers who believe the volume will forever remain below pre-recession levels  — which Handelsman now thinks may have been worth including.

“We may never return to a time when banks were as aggressive as 2003 through 2008,” he says. “Banks are not diving in – they’re putting their toes in the water and going in step by step.””