Get Started: Business owners get good prices for companies
BUSINESS SALES SNAPSHOT
Small and mid-sized business owners looking to sell and retire are getting good prices for their companies even though they’re not spending a lot of time preparing their companies for sale. That’s the finding of a fourth-quarter survey of business brokers released by researchers at Pepperdine University’s Graziadio School of Business and two industry groups, the International Business Brokers Association and the M&A Source.
Owners who sold their companies for less than $500,000 got 3 percent more they originally asked for, according to the survey. Small and mid-sized businesses overall, with sales prices ranging up to $50 million, fetched 99 percent of their asking price; a year earlier, owners were getting 90 percent.
Although business brokers recommend owners start preparing a company for sale several years before it goes on the market, many sellers don’t heed that advice. According to the survey, more than three-quarters of companies that sold for under $500,000 were sold without advance planning, as were half of companies that sold for $500,000 to $2 million.
Advance planning for a sale, which includes making sure the businesses finances are solid and that employees are prepared for a management change, can help an owner get a better selling price, business brokers say.
More than 70 percent of the buyers for the smallest companies, those that sold for up to $2 million, were individuals, and nearly 30 percent were other businesses. The buyers for larger companies were more mixed — nearly 40 percent were individuals, other businesses accounted for 40 percent and nearly 20 percent were private equity firms.
An owner’s plan to retire was the primary reason for businesses going on the market, cited in the case of transactions up to $5 million. However, for those between $5 million and $50 million, the owners were selling because they were burned out.
The survey questioned 264 business brokers and mergers and acquisitions advisers.
HOW TO PRICE
Pricing products and services is a process many business owners struggle to understand, and many end up underpricing what they sell. SCORE, which gives free advice to small businesses will sponsor an online seminar on pricing on March7 at 1 p.m. Eastern time. You can learn more and register at http://bit.ly/2CoaiWs .