Go Ahead, Sell Your Business in 2011 -- If You Can
How many business brokers will tell you that now is a bad time to sell your business?
If you guessed zero, you guessed wrong. In fact, nearly one in four brokers surveyed by online marketplace BizBuySell.com in February said 2011 would probably not be much better than last year for business sales.
The brokers based their downbeat outlook largely on the lack of available financing for would-be business purchasers. Nearly half, in fact, said financing was the single biggest obstacle to closing a deal. They blamed commercial banks' stinginess for the financing shortfall.
Another problem, according to an earlier survey, is the government's failure to educate small business owners and others about the benefits provided in the Small Business Jobs Act enacted last year. The brokers also blamed slow and incomplete recovery from the general economic recession for continuing to dissuade both buyers and sellers of businesses.
Emily Maltby on the Wall Street Journal's In Charge blog points out that sellers, at least, have good reason to be coy about placing their businesses on the market. BizBuySell's calculations show that the number of businesses sold last year dropped by a quarter compared to 2008, and was up just 3 percent from 2009.
Even worse, the median sale price has been on a steep decline, falling from $190,000 in 2008 to $160,000 in 2009. Prices slipped further to $150,000 last year. Not surprisingly, a quarter of brokers said sellers unwilling to lower their asking price are a primary obstacle to successful transactions.
The brokers who expect 2011 to be better than 2010 for business transactions are basing their optimism on continued economic recovery, and the effects of some pent-up demand from buyers and sellers who sat on the sidelines during the long period of general uncertainty. They also expect financing to become more available.
So why sell now rather than say, next year when the recovery will presumably be further along and loans may be more available? The brokers suggest that sometime within the next couple of years, business owners concerned about a possible end to favorable tax treatments for capital gains after 2012 will generate a sizable increase in the number of companies on the market.
If correct, that prediction may put business owners between a rock and a hard place. That's because 66 percent of surveyed brokers think it will take at least 18 months for the volume of transactions to get back to where it was before the bust. That's better than the 62 percent of brokers who felt that way in a November poll. And it's significantly better than the 53 percent who responded similarly in July.
When you add it up, the 77 percent of business brokers who are expecting better times in 2011 may be indulging in some wishful thinking. Or it may be that they are thinking only of their own businesses, and not those of their clients.
Mark Henricks has reported on business, technology and other topics for The New York Times, The Wall Street Journal, Entrepreneur, and other leading publications long enough to lay somewhat legitimate claim to being The Article Authority. Follow him on Twitter @bizmyths.
Image courtesy of Flickr user hive, CC2.0