Most people are familiar with the "Perfect Storm" - probably because they read the Sebastian Junger book or saw the movie. The Perfect Storm refers to the unique combination of atmospheric conditions that led to the massive storm that claimed the fishing boat Andrea Gail described in Junger's book. I read the book while I was out to sea for a month with the US Navy. Despite the fact that the ship I was on was quite a bit larger than a fishing boat, it was somewhat disconcerting reading about that storm while at sea!
Today we are seeing some signs of a different type of "Perfect Storm" - a combination of economic factors that together make this a great time to sell a business. First, interest rates are extremely low. The Fed has recently stopped raising their short-term Fed Funds target rate, but how long short (and long) term rates will remain this low is anybody's guess. Second, the long term capital gains tax rate is a relatively low 15%. I would bet that this will be raised in the near future depending on the results of the 2008 Presidential election - perhaps even sooner. Finally, there is a lot of undeployed cash out there in companies and investment funds looking to go to work. Investors want better returns than Savings Account returns. Acquisitions are a good way to put this money to work. Like the interest rates and tax rates, the well of money will dry up at some point too - especially after a few bad acquisitions by a few too many acquirers.
Together with this "Perfect Storm" is the pending retirements of the baby boomer generation. According to consulting firm ROCG, between 2 and 3 million small to medium-sized businesses will be tranferred to new ownership as the baby boomer generation reaches their 60s. This event could create an environment where there are significantly more sellers than there are buyers. (By the way, if you are a business owner you can receive a free report on business owner transition plans by taking a survey at the following address: www.business-transition.com/survey. Your code is A5.)
I don't know how long the "Perfect Storm" conditions will last, and I don't know exactly what is going to happen when the Baby Boomers start retiring. But at the risk of sounding self serving, I do believe that now is a good time to sell a business.
P.S. Link to a good article related to above: http://www.bizquest.com/resource/private_equity_baby_boomers_soon_will_be_driving_-203.html
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3 comments:
Because of the crazy economy, I have to sell my business after 3 years of running it. I'm sad because was able to turn a small profit after the second year. Anyway, I'm looking for a place which I can sell my business, particularly a website. Do you have any suggestions? Thanks.
Susan - There are lots of websites out there for buying and selling businesses - here are a couple: www.bizbuysell.com, www.bizquest.com, and www.businessesforsale.com. You might consider using a broker to help you package and sell your business - they'll know how to value/price it realistically and they'll have access to buyers (through websites and other methods). There is usually no obligation to talk to a broker and see if they are a good fit for you. Feel free to give us a call (we are brokers - we cover New England) or look one up through the IBBA (International Business Broker Association - www.ibba.org) or NEBBA (New England Business Broker Association - www.nebba.com) websites to find a broker in your area. We are happy to answer any questions you might have. Good luck!
@Susan -- Yeah, times are tough right now. I'm sorry to hear about your business. I recommend looking into your local Chamber of Commerce. They should be able to help you.
I also highly recommend checking out BizTrader.com, which is an online global marketplace where you can buy, sell and invest in small business. It's very inexpensive to post your business, and often times it's free. Check it out and good luck!
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