Its a Seller’s Market for Many Businesses
When the novel coronavirus pandemic caused the country to lock down last March, many people assumed that this would trigger a glut of businesses for sale, with savvy buyers swooping in to snap up bargains at pennies on the dollar. It was also thought that business owners would have a difficult time selling, and that businesses would stay on the market for a long time without attracting any interest.
As we have exited summer and entered into the fall and winter months, things are not turning out quite the way they were expected to. While every market in the US is unique, what ended up happening in many areas is that owners delayed their plans to sell and pulled their businesses off the market.
Much of the reason for this happening is the psychology behind the crazy COVID-19 situation. The thinking among many sellers was that the price of their business would drop so much that it would not be worth it to keep it on the market. After all, when a business is suddenly forced to close and loses all of its monthly revenue, there is no doubt that this will affect its perceived value among prospective buyers.
Another thing that many business owners believed is that the economy would quickly rebound and that they would be able to sell their business at a much better price in the not-too-distant future, perhaps next year. As we stand today, the economy does appear to be in the middle of the V-shaped recovery that everyone has been hoping for, so this could turn out to be a winning strategy.
Some businesses began to do unexpectedly well during the pandemic, which caused their owners to reconsider whether or not they wanted to sell. For example, restaurants that could quickly transition to drive-through or curbside pickup service after being forced to close their dining room enjoyed (and continue to enjoy) a lot of support from local consumers. In some cases, sales are far better now because of these changes than they were before the pandemic.
What all of this adds up to is a business sales market that looks fairly similar to the residential real estate market. Inventories in many business categories are very low at a time when there are quite a few buyers looking to purchase a business.
The end result, as Bloomberg reported in late July was a 6% rise in median business sale prices across the country. There are various winners and losers hidden in the details of this report, and year-over-year sales are down significantly from 2019 because of fewer businesses that are for sale. But the fact remains that there are a lot more buyers than sellers in many categories, making it a good time for an owner who is looking to retire or move on to another venture to put their business up for sale.
The Business Outlook for 2021 and Beyond: Being hit with a global pandemic the likes of which we have not seen in more than 100 years will continue to create volatility and uncertainty in the business world. And of course, we cannot discount the impact that the US presidential election and other potentially disruptive factors might have.
One thing that is certain is the economy is recovering and should continue to do so for the months ahead. However, it is unclear whether or not we will make it all the way back to pre-pandemic levels.
Another thing we can be pretty sure of his that COVID-19 will result in some permanent changes in the way we do business. For example, practices like social distancing and wearing masks do not look like they are going away anytime soon. Businesses are also more likely to keep having their employees work from home if it is practical to do so.
Speak with a Local Business Intermediary about Selling your Business: Is this a good time to sell your business? It might be a great time if you are in an industry that is experiencing a seller’s market. The best way to find out is to speak with a business broker.
Also known as business intermediaries, business brokers handle the sales and purchases of businesses, and they have their fingers on the pulse of what is happening in your local market. They can provide helpful advice on when it would be best to sell, and if you decide to retain their services, they can work closely with you to help ensure that you receive maximum value, and that your transaction will be smooth and seamless.