Sellers of businesses often ask me how the business climate is in 2015. How is it? It couldn't be better right now. With an average of less than 180 days to closing (the lowest since the Great Recession), there is demand for almost every kind of business and service you can imagine. Can it last? With unemployment hovering near 5% and interest rates still near 0% for the better part of a decade, it is definitely a seller’s market right now. Where I live in Central Texas certainly did not see the downturn that the rest of the U.S. saw during the economic downturn in 2008 and 2009. Therefore, the local economy here in Austin is especially hot right now. People are moving hear at a rate of over one hundred people per day.
As a seller, how do you take advantage of these good times? If you are concerned about another recession and feel as though you are at an age where that might zap too much out of you, the time to sell might be now. This, of course, depends on each individual’s personal situation. But, at six-plus years, this is already the third longest bull market in history. As of early September 2015, the stock market is starting some gyrations and the Federal Reserve is meeting in a few weeks to determine if it is time to raise interest rates for the first time in almost ten years. While a slight, .25% increase in interest rates will not materially affect your business’s value, this could start the Fed on a course to keep raising rates. The more rates go up, the more the value of your business could theoretically go down. Why? Buyers simply cannot afford to pay the same amount that they previously could for your business. If your business continues to increase the top and bottom lines by twenty-five percent or more per year, this increase may not matter as much to you. Your business will continue its rapid ascent in value.
If you are thinking about potentially selling your business in the next five years, it might be to your advantage to talk to your local business broker about your options. Some business owners were mentally wiped out after the last recession. If you were one of those people, this could be the right environment for you to start thinking about your exit strategy.
Charles Knox is a mergers and acquisitions advisor and business broker for small and middle market business in Austin, TX. Having advised on nearly thirty business acquisitions in the last five years, Mr. Knox has won numerous national awards for his mergers and acquisitions acumen. He has been in the financial industry for nearly 20 years and worked for some of the top financial institutions in the world.