For many people, the New Year is a time for reflecting on where they are in their lives and creating resolutions in areas where they want to make improvements. This is also a time to consider pursuing new career opportunities or perhaps retirement. If this means the possibility of selling a business in your case, the good news is that the New Year is a great time to sell a business.
One of the major reasons why the first few months of a new year can be an ideal time to sell a business is because of what we talked about earlier; people wanting to make changes in their lives, particularly with regards to their careers. We live in an entrepreneurial age where the number of new small businesses continues to grow year-over-year, and people who are serious about a New Year’s resolution to get into a new business usually want to accomplish this goal by the end of the first quarter of the year.
There are also several unique factors that make the beginning of 2023 a really good time to sell a business. Prospective entrepreneurs enter this year with a lot more confidence that the pandemic is winding down and the economy is going to be more stable. The Covid-19 virus is certainly still a concern, but there is not so much worry anymore about lockdowns that could suddenly shut a business down for an extended period.
Table of Contents
- Here are some of the other forces that are driving the current seller’s market for available businesses for sale
- There are a few clouds on the horizon that could change the calculus for buyers and sellers
- Prepare Now to Sell Your Business in 2023
Here are some of the other forces that are driving the current seller’s market for available businesses for sale
- Historically Low Interest Rates: Interest rates for commercial loans are currently at or near all-time lows. In addition, there are numerous alternate lending sources that buyers can tap into. This opens the door to a much wider pool of prospects who could get approved for financing.
- Pent Up Demand: Because of the pandemic, a lot of people moved their money to the sidelines and adopted a “wait and see” approach. Now, there is pent-up demand for opportunities to invest that money in places with strong growth potential, such as a new business.
- Perceived Risk Mitigation: There are many people who want to become entrepreneurs and see right now as a perfect time to do it. Because of the strong job market, individuals know that if their business venture does not pan out, they will not have a hard time finding a job. This is happening a lot in the corporate world especially, where “corporate refugees” (as they are called) are fueling demand for available businesses.
What types of businesses are buyers looking for? Profitable ones, of course. But businesses that survived the pandemic in healthy financial shape are in great demand. This type of proven resiliency is very attractive, because it shows buyers that the business is well-positioned to effectively overcome future adversities as well.
It is important to realize that 2022 is not all sunshine and roses in the business world.
There are a few clouds on the horizon that could change the calculus for buyers and sellers
- Supply Chain Disruptions: Problems with our supply chains have created a lot of challenges for businesses in 2021, and this could continue to be an issue. Some businesses are more impacted by this than others, and supply chain disruptions are something to keep an eye on as we progress into the New Year.
- Baby Boomer Retirements: Every day, another 10,000 Baby Boomers turn 65. And in recent years, many experts have assumed that a massive number of Boomer retirements would create a glut of available businesses for sale. So far, these concerns have been largely unfounded. This generation has always been focused on staying youthful if possible and living life to the fullest, but the laws of time and chance dictate that at some point, we will start to see a significant increase in market supply as more Boomers retire.
- Potential for Higher Taxes: Since the new administration took office last January, there has been a concern about higher capital gains taxes which could affect how much profit an owner could take after selling their business. Currently, the top capital gains rate is 23.8%, but some lawmakers have proposed an increase to as high as 43%. With 2022 being a midterm election year, large tax increases are not as likely, but it is still something to look out for.
Prepare Now to Sell Your Business in 2023
Another reason that now is a good time to sell a business is because the pandemic has made the sales cycle shorter than it used to be. Post-pandemic, much of the work can be done virtually, which could potentially cut several weeks from the time that it would have taken previously to complete the transaction. But all that said, it is still very important to prepare well ahead of time to sell your business.
Preparation starts by putting together a team of professionals to help you with the sale of your business. This should include, at a minimum, an attorney, an accountant, and a business broker, all of whom should be experienced and reputable.
Your attorney will help draft all the documents and make sure that the transaction is done legally and properly. Your accountant will help you organize your financial records, so you can present a clear and transparent picture to prospective buyers. And finally, your reliable CPA and accounting firm broker will list your business for sale while maintaining confidentiality, and they will work closely with you throughout each step of the sales process to help ensure a smooth and successful transaction.
