BizBuySell Insight Report for 2022
BizBuySell has issued their latest insight report, which summarizes market growth and trends from last year. In this report, they have several interesting areas to report including a summary of how lower sales prices and rate hikes impacted the value of businesses in recent months. The report can be found at https://www.bizbuysell.com/insight-report/#reportArchive.
Overall Trends in 2022
Buyers currently appear to have some leverage when it comes to the prices of businesses on the market. When comparing 2022 with 2021, we see a 4.7% increase in closed transactions. Comparing it to the year prior, there is a 19% gain. Obviously, 2020 sales were negatively impacted by COVID.
While sales grew substantially in the first half of 2022, there was a decrease in momentum in the second half of the year due to inflation and interest rate increases.
The number of transactions recorded by BizBuySell.com in 2022 are actually fairly comparable to 2021, with numbers of 9054 and 8647, respectively. While the transactions raised 27% and then 14% in the first and second quarters, transactions then lagged in the second half, dropping by 2% and then 12.7%.
Trends Among Business Owners
BizBuySell’s surveys showed that the majority of owners are concerned about rate hikes and inflation. In fact, 53% say that the rate hikes are having a negative impact on them. They also reported concerns about rising SBA loan rates, as many business owners utilize their lines of credit. In addition to that aspect, there are still supply chain issues that are negatively impacting businesses.
The main takeaways from 2022 seem to be a steady but slow progression in growth. Moving into 2023, interest rate hikes and inflation seem to be on everyone’s mind as a prevailing factor that will have an impact on sales and growth.
It’s Never Too Early to Create an Exit Plan
The report also reveals that according to data acquired by BizBuySell, only 53% of business owners say they have an exit plan. Only 58% of owners reported knowing what their business is worth. If you are a business owner and would like to find out more about what your business is worth, a business broker or M&A advisor can assist you with that information.
Copyright: Business Brokerage Press, Inc.
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Expectations for Business in 2023
BizBuySell just released its latest insight report, which tracked sales and growth in 2022 and compared it to the prior year. Overall, we are seeing a high demand for service-based businesses as well as an increase in restaurant business sales. The insight report also reveals what business brokers across the country are expecting for 2023 and beyond.
Data on Service Business Sales
In 2022, 39% of the acquisitions tracked by BizBuySell were service businesses, and their transactions were 7% higher than 2021. The service sector typically includes predominantly financial and healthcare related businesses. These types of companies are usually considered to be low-risk.
Across the map, buyers were willing to pay more for service businesses last year. In fact, the median sales price for service businesses rose 4% over 2021. It’s interesting to note that the sales prices were even higher than the pre-pandemic levels. Also, there is a trend towards buyers seeking out socially responsible and environmentally conscious businesses.
Data on Restaurant Businesses
Restaurant businesses also did quite well in 2022. In fact, the acquisitions of restaurants jumped 20% over 2021. They previously had plummeted 38% in 2020. While these numbers are strong, they are still 21% lower than before COVID.
Restaurant businesses also had less time on the market. The median days were 169 instead of 176 the year before. Restaurants also sold for more money. The median revenue for closed transactions was up 7% and the cash flow was up 13%. It seems that the general consensus is that dining out is popular again after years of struggles due to people avoiding meals in public.
Expectations for 2023
The conclusion of this data collected about 2022 is that buyers no longer will benefit from sitting it out. Higher interest rates are expected to be more and more of an impact for buyers in 2023. The good news is that most experts are expecting rates to get better in 2024.
Business brokers surveyed by BizBuySell expect that the market in 2023 will continue at the same place as it did in 2022. Many sellers will seek to retire. The concern of a recession should also motivate more baby boomers to sell. In fact, 45% of owners are saying they are selling to retire. At the same time, buyers will be looking for profitable companies that will grow.
The data revealed by BizBuySell indicates that those who are buying businesses may currently have the upper hand. In fact, 47% of brokers say that their view is that the market has shifted towards buyers. They attribute this to rate increases. They are finding that the majority of buyers are saying that current businesses are overpriced.
Sellers Must Be Flexible
The insight report shows that overall business brokers believe there is pressure on sellers to be more flexible in their pricing and terms. As always, seller financing is essential. In fact, 90% of buyers are saying it’s important for owners to offer this option to them. 95% of brokers echo this sentiment.
It should come as no surprise that businesses with strong financials are in high demand. When these businesses are considered recession proof, this fact is even more true. But even sellers with the strongest businesses may still have to consider offering financing or adjust prices due to the higher rates. Sellers who want to sell in the near future, of course, should begin preparing their exit now.
Copyright: Business Brokerage Press, Inc.
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5 Ways that Sellers Can Focus on the Positives
When you are looking to sell, always focus on the positive aspects of your business. Many business owners fail to properly make a case for the benefits of their businesses to prospective buyers. Be sure to make it clear that your business has stability and ample financial health. Let’s take a closer look.
1. Prepare in Advance
Preparing paperwork in advance will help to make sure that everything is in proper order and you’re not scrambling at the last moment. When your records are organized and correct, your prospective buyer will be able to truly see the value of your business. Buyers will also like to know that you have robust accounting processes that they can rely on in the future.
You should also make sure that inventory is in stock and that any necessary upkeep has been done. All of these updates are part of the big picture when it comes to presenting your business in the best light to buyers.
2. Reveal Your Methods of Operations
You’ll also want to demonstrate that you have a solid formula for a successful business. Buyers love to see items in place like procedures manuals, as they reveal the routine tasks necessary to run the business. Anything you can provide that will help the buyer understand how to successfully run your business will help them understand its advantages.
3. Keep Things Consistent
During the sales process, you’ll want to be sure to maintain regular operations. If prospective buyers see any kind of dip in success, this could negatively impact your deal. Selling a business is an all-encompassing process, and it can be next to impossible to handle all the associated tasks while still putting all the necessary time and energy into your business.
Additionally, you will want to absolutely make sure confidentiality is maintained. A breach of confidentiality, whether to employees or to competitors, can quickly sabotage your deal. There are countless instances where a deal fell through due to a breach in confidentiality.
4. Get an Outside Perspective
What is the best possible light for your business? Since you’re involved in the day to day running of the business, it is hard to have an outside perspective. Plus having never sold a business before, it can be hard to know what buyers will respond positively to. That is a great reason to work with a business broker or M&A advisor. They have years of experience knowing what attracts and deters buyers. They will help you to emphasize your strengths and minimize your weaknesses.
While emphasizing the positives, you will of course want to be sure to be transparent about issues affecting your business. Otherwise, the lack of knowledge can come back to haunt you. When it comes to negative factors, your business broker or M&A advisor will work to help buyers to understand how some of these can be turned into positives once they take over the business. Or they can assist you to fix some of those weaknesses before putting your business on the market.
5. Price Your Business Correctly
It should come as no surprise that if the price you set on your business is too high, you will lose interest from prospective buyers. That is another advantage to working with business brokers or M&A advisors. They will assist you to assign a fair market value to your buyers. When the price is optimal, the strengths of your business will stand out more. While it’s essential not to undervalue your business, you also want to make sure that you don’t overvalue it either. The good news is that brokerage professionals have experience and expertise at listing the optimal price.
Copyright: Business Brokerage Press, Inc.
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The Top 3 Reasons Why Deals Fall Through
No one likes to think about the deals that didn’t succeed. However, the fact of the matter is that sometimes things go wrong during the process and a sale doesn’t successfully close. We have pinpointed the most common reasons why this happens into three main categories. By understanding the issues that can prevent a deal from finalizing, we are able to dramatically maximize the odds of success for clients.
1. Issues with the Seller
If a seller lacks a strong reason for wanting to sell his or her business, that seller is often unable to be flexible on the terms of a deal. As a result, when complexities arise during the sales process, the seller doesn’t have the patience, commitment and/or stamina to work to overcome those issues. In many cases, a seller has presented an unrealistic price for the business and simply cannot be realistic about the true value the business will sell for on the market. Another common issue that arises with sellers is that they are not fully transparent with the potential buyer. For example, they might be neglecting to mention serious problems with the business, such as new competition on the horizon.
2. Issues with the Buyer
Just like circumstances surrounding the seller may interfere with the sale of a business, the same is true for buyers. In some cases, the buyer is just mildly interested in being a business owner. As a result, he or she doesn’t have the wherewithal to continue on and navigate the complexities that can arise during the stages leading up to a successful deal. There are other issues that often pop up with buyers as well. For example, they also may have unrealistic expectations regarding price. Some buyers are not willing to pay the fair market value for a given business. In other cases, once they find out the amount of work that will be required to make the business successful, they are unmotivated to continue.
3. Third Party Interference
In some instances, there is no issue regarding the buyer or seller. Instead, it is a third party that interferes. An example of this would be a landlord being unwilling to transfer a lease or grant a new one. Or unexpected issues with the federal or local government could cause problems. Another problem that involves a third party occurs when outside advisors, such as attorneys, overlook the fact that the goal is to put together a deal that will work. Instead, they get so caught up in protecting the best interests of their clients that they erect too many roadblocks for a deal to succeed. These types of problems are often completely unexpected by either the buyer or seller.
It is hard to argue with the fact that if a buyer isn’t really committed to selling, perhaps it is not the best choice for them in the long run. The good news is that if potential problems are handled at the appropriate stage of the deal, most business deals do come to a successful conclusion. Business brokers and M&A advisors are specialists when it comes to resolving and circumventing potential issues.
Copyright: Business Brokerage Press, Inc.
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The Four Essential Stages of a Closing
When it comes to reaching a successful closing, there are four important stages to keep in mind. In this article, we will take a look at the process and what sellers can expect. If you are planning to sell a business, it is also helpful to understand in depth what the stages are from a buyer’s perspective.
The Letter of Intent (LOI)
The letter of intent is one of the responsibilities that your business broker or M&A advisor will take on to assist you. Your letter of intent should include the price, terms, time frame anticipated as well as other factors, such as the seller’s transition and training. Details such as what is included and what is not included in the deal should always be addressed in this agreement.
Due Diligence
The due diligence process is also an essential step. Your business broker or M&A advisor will guide you during due diligence. All important facts and documentation should be evaluated, ranging from tax returns and internal P&Ls to leases, bank statements, and customer/employee lists. Buyers who do not invest enough time and energy into due diligence can often have serious regrets after the deal has closed. Be sure to take your time with this stage.
There are other areas of due diligence that should not be overlooked including the very important NDA, financial statements, credit reports and other factors. If you want to have a smooth closing (which clearly you do!), you will want to wisely invest your time in due diligence.
Financing Approval
Financing approval is considered your lender’s responsibility. However, if you need advice and insights, your business broker or M&A advisor should be able to assist you. You may want to look into local SBA lenders or seller financing.
Agreement Drafting
The final agreement drafting period must be taken seriously. This is a step where your attorney will be of tremendous assistance. Your written agreement should cover a wide range of aspects including everything from payment terms to assets and liabilities. Both the buyer and seller should know exactly what the arrangement will be.
When these four stages are followed properly, your deal should close in a timely and effective manner. If you have any concerns or uncertainties about these parts of a closing, be sure to always ask the necessary questions.
Copyright: Business Brokerage Press, Inc.
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Take Inventory of Your Company
Most business owners don’t give a second thought to the idea of going to the doctor for an annual physical. So why do they not give the same level of care and consideration to their company? The fact of the matter is that many executives literally go decades without giving their companies a “physical.” They only stop to truly evaluate their business when required by regulations or another matter forcing them to do so.
Consider an Annual Valuation
Let’s take a look at some of the reasons why business owners should get an annual valuation. The first issue concerns the curveballs life often throws at us. At any given time, you and your business could be unexpectedly hit with everything from partnership issues or life changes like a divorce to changes in bank relationships. When you keep careful track of the value of your business, you will know in advance how potential changes would affect you. Perhaps even more importantly, you will gain an understanding of the health of your business.
Monitor Business Growth
It’s critical to be aware of how your business compares from one year to the next. Are values definitely increasing? If not, you would surely want to know immediately and start making necessary adjustments. If a major problem were to surface, you would want to know about it right away so that you can take action. Otherwise, you might just let the years pass you by while this issue goes unchecked. This is the kind of data you will gain when you commit to regular valuations.
Be Prepared for the Unknown
You might feel far from ready to sell. However, you should always be ready if the situation does present itself. What if an amazing opportunity showed up on your doorstep? On the flip side of the coin, what if a life issue like illness put you in a situation where a sale was suddenly necessary? If you are not ready both mentally and with the necessary paperwork for your business prepared, you might miss out on a legitimate opportunity.
Statistics gathered from a prominent accounting firm showed that 65% of business owners do not know what their company is worth. However, at the same time 75% of the net worth of these business owners is tied up in their business. The problem with these statistics is quickly evident. Be sure to take as good of care of your business as you would take of yourself.
Copyright: Business Brokerage Press, Inc.
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How to Pick a Business Broker Who Meets Your Demands.
When it comes time to sell your business, you want to make sure you find a business broker who meets your specific needs. After all, this is a big decision, and you want to work with someone who you feel comfortable with and who has your best interests at heart. So, how do you go about finding the right broker for you? First, take some time to research different brokers in your area. Look for ones with experience in businesses similar to yours, and read online reviews to get a sense of their reputation. Once you’ve narrowed down your options, set up initial consultations with each of the brokers on your shortlist. This will give you a chance to ask questions and get a feel for their personality and approach. Ultimately, choosing a business broker is an important decision, so take your time and choose someone you feel confident in. With the Durango business brokers by your side, selling your business will be a much smoother process.
1. Defining your business and your expectations of a broker
Starting a business is a complex process, and there are many factors to consider along the way. One important decision is choosing the right broker. A broker can provide invaluable guidance and support during the startup phase, and they can help you navigate the often-complex world of business ownership. But not all brokers are created equal. When looking for a broker, it’s important to define your business and what you hope to accomplish. What are your specific needs? What are your goals? With a clear understanding of your business, you’ll be in a better position to find a broker who can help you achieve success.
2. Find a broker who specializes in businesses like yours.
When you are looking for a broker to help you with your business, it is important to find one who specializes in businesses like yours. This way, you can be sure that they understand the unique challenges and opportunities that come with your industry. They will also be able to provide insights and advice that are tailored to your specific needs. In addition, a broker who is familiar with businesses like yours will be able to connect you with the right financial institutions and resources. Finding a broker who specializes in businesses like yours is an important step in ensuring that you get the best possible service and advice.
3. Set up meetings with potential brokers to learn more about them.
Any big decision requires research, and choosing a broker is no different. You want to be sure that you’re entrusting your finances to someone who is knowledgeable and has your best interests at heart. The best way to get to know a potential broker is to schedule a consultation. This will give you an opportunity to sit down with the broker and discuss your financial goals. It’s also a good chance to ask any questions you may have about the process and get a feel for the broker’s personality. By taking the time to consult with multiple brokers, you can be confident that you’re making the best decision for your future.
Conclusion
When you are ready to sell your business, it is important to find the right broker who can help you through the process. Durango business brokers are experienced and knowledgeable and will give you the best deal possible. By asking the right questions, you can make sure that you are finding a broker who meets your demands. Don’t hesitate to contact us if you have any further questions about finding or working with a business broker—we’re here to help!
Read MoreDefending Your Asking Price
When you’re putting your business on the market, one of the top considerations is your asking price. Once you have a fair price established, let’s take a closer look at how business brokers and M&A advisors work with their clients to back up that price with details concerning why it is justified.
Telling the Story
A key aspect of defending your asking price is telling the story of your business. Your brokerage professional will help you go over the details of the story so it is properly conveyed to prospective buyers. Buyers, of course, will want to understand the story behind the business so that they can understand its history and why it is for sale. You will want to feel prepared to interact with prospective buyers and how to discuss details concerning its value.
Your business broker or M&A advisor will put together written materials about your business. These also help buyers gain clarity on the story of your business and its sales message.
Seeing Your Buyer’s Perspective
It goes without saying that a big part of coming up with your decision of the asking price is that you want something that sounds not only reasonable but also attractive to buyers. We recommend trying to view the entire transaction from the buyer’s perspective. The buyer must be able to see how they will successfully own and potentially operate the business, as this is essential for fostering a completed deal.
Another consideration is, how will they pay for the business? In many cases, it can tremendously benefit a transaction to offer assistance in the way of seller financing. Seller financing can speed up the process, as you will not be so reliant waiting for the bank loan process, which can drag out for months.
The Complexities of Your Asking Price
The process of establishing and then justifying your asking price is not always simple. It is a symphony of moving parts, and it’s important to feel educated and involved in the process. Ultimately justifying the asking price is the launching point of the process, but it is also just the beginning of the journey towards the completion of a successful deal.
Copyright: Business Brokerage Press, Inc.
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What Benefits do Brokers Add to Your Business?
When it comes to managing your finances, it pays to have a professional on your side. Business brokers in Colorado offer a number of advantages, from helping you find the best interest rates to providing personalized service. With years of experience in the industry, a broker can provide valuable insights and guidance that can save you time and money. They can also help to negotiate terms and conditions that are favorable to you. In addition, a broker can offer peace of mind by handling all the paperwork and details involved in financial transactions. By working with a broker, you can focus on running your business, safe in the knowledge that your finances are in good hands.
2. Describe the different types of services that brokers offer.
A broker is an individual or firm that acts as an intermediary between buyers and sellers. Brokers are typically licensed to buy and sell securities on behalf of their clients. They also charge a commission for their services. The type of service that a broker offers depends on the broker’s specialization and the needs of their clients. Some brokers only execute trades, while others provide advice and guidance to their clients. Some brokers also offer research services, which can include providing market analysis and recommendations. Ultimately, the type of service offered by a broker depends on the needs of their clients and the broker’s area of expertise.
4. Explain how brokers can save businesses time and money.
Businesses of all sizes can save time and money by working with insurance brokers. When it comes to insurance, businesses have a lot of options to choose from, and each option comes with its own set of benefits and drawbacks. An experienced broker will take the time to understand the specific needs of a business and then find the insurance policy that best meets those needs. This can save businesses both time and money by ensuring that they don’t overpay for coverage that they don’t need. In addition, brokers can also help businesses save money by negotiating with insurance companies on their behalf. Through their relationships and expertise, brokers can often get businesses better rates than they could get on their own. In short, there are many ways in which insurance brokers can save businesses time and money.
Conclusion
Working with a business broker in Colorado has a number of benefits for businesses. Perhaps most importantly, brokers have access to a wide range of insurance carriers, which gives them the ability to find the best possible coverage at the most competitive prices. They can also help you navigate the claims process in the event that you do need to file a claim. Ultimately, working with a broker is an efficient and cost-effective way to ensure that your business has the right type and amount of insurance coverage. By understanding what benefits brokers offer, you can better assess your needs and determine if working with a broker is the right decision for your business.
Read MoreCommon Legal Mistakes That Sellers Make
Nothing strikes fear in the heart of a business owner like a legal mistake. The best way to ensure that you will avoid serious legal issues is to work with a trusted and experienced team. Otherwise, it’s easy to accidentally miss necessary steps.
When you’re selling a business, there are a lot of moving pieces, and that means that there are ample opportunities for things to go wrong. It’s always best to be prepared. When mistakes are made, it can not only mean a significant expenditure of your time, but also your money. These kinds of issues can also bring your sales process to a total halt and perhaps derail your deal completely.
There are more than a few sellers who overlooked the importance of working with an attorney. When you are selling a business, it should come as no surprise that there is a great deal of paperwork. Your attorney will guide you to make sure that all necessary preparations have been made from a legal perspective. When your prospective buyer sees that your legal “ducks are in a row,” he or she will feel more confident in your organization and level of professionalism.
One document that often is skipped is the Letter of Intent (LOI). Sellers assume that things will move along more quickly if they forego this document. Keep in mind that the LOI truly has its place in almost any deal. After all, it not only outlines both parties’ expectations in writing, it also works to protect your best interests. Once projective buyers have signed this document, it proves they are serious about the deal. That means it is not so easy for them to walk away without consequences.
What if your deal falls through completely? Will your buyer then reveal to the public that your business was for sale and even the potential terms that were on the table? This could indeed occur if you were not backed up by an NDA. Don’t skip this very important document either. Your business broker or M&A advisor will be very well acquainted with NDAs and guide you in the best way possible.
Warding off these kinds of issues is one great reason to be equipped with a small team of professionals to turn to for advice. This team should include your business broker or M&A advisor, accountant, and attorney.
Copyright: Business Brokerage Press, Inc.
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