Optimistic forecasts are only valuable when they are accurate. Fortunately, the sunny economic predictions for 2018 came true in the third quarter — high prices and healthy business financials resulted in one of the brightest small business markets in years.
According to BizBuySell’s Insight Report, small businesses sold for an average of $249,000 in Q3 — up nearly 11 percent from last year and the highest since data collection began in 2007. This gives small business owners an opportunity: they can now ask for and likely receive more for their business than in years previous. Business financials also climbed to record highs, indicating that the market presents opportunity to both sides, with buyers receiving healthy, high-profiting businesses in return.
There are opportunities to capitalize on these strong conditions for buyers and sellers of every level, from new entrepreneurs to retirees. Savvy small business owners are looking into all the possibilities to take advantage of today’s strong market, which sometimes means not entering at all. The choice to sell (or not to sell) depends not only on individual business goals, but also on opportunities available to owners locally.
Before making a decision, small business owners should consider all of their options:
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Sell. The current market is well-suited for small business owners approaching retirement or for those who have been waiting for the opportune time to sell. In fact, according to a BizBuySell data, nearly 60 percent of Baby Boomers are taking advantage of upward market trends to exit their business in the next two years. While retirement is the most common reason for exiting a business, burnout is the second. For both Baby Boomers and burned-out business owners, the strong market presents an opportunity to sell one or two businesses for a profit or in exchange for a more passive role or business opportunity — allowing for part-time work and partial income.
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Add Value. Younger, smaller businesses can capitalize on the strong market with continued growth. Business revenue and cash flow have grown four and five percent year-over-year. These record high business financials in Q3 present a key opportunity to invest back into the business and continue to grow organically. Business owners should consider what will add value to their business in both the immediate and long-term. This includes improving relationships with key customers and vendors, upgrading the efficiency of their product or service offerings and refreshing the physical infrastructure of the business.
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Expand. Businesses that have outgrown their current space, either geographically or physically, should consider expansion. Taking advantage of rising financials, business owners can use revenue increases to re-invest in and multiply an already successful business model. Rather than buy new, opening a second location or expanding service offerings geographically will expose new customers to an existing infrastructure that works. Business owners can also use previous experience and knowledge within their own industry to acquire a competitor. It’s more beneficial to acquire and fold a similar enterprise into your portfolio than for another competitor to do so. Regardless of the expansion path chosen, access to these new economies of scale transforms the current business model into a more profitable enterprise. A new, diversified stream of customers revitalizes existing sales cycles — making the whole enterprise more desirable when the time comes to sell.
Buying isn’t the only option for entrepreneurs looking to take advantage of this economic upturn; strong markets are advantageous for business owners across the board. Before capitalizing on an opportunity, small business owners should consider which route aligns best with their business goals and plans. Market research and self-evaluation both become necessary when deciding what move to make.
Regardless of the method, if small business owners are looking to secure the financial future of their enterprise, capitalizing on a strong market is the best way to do so. Current upward trends in both sale prices and business financials provide owners with a golden opportunity to revitalize and build on their success — one which may not always be in the forecast.
