This is What Business Buyers are Telling us

NEWS

This is What Business Buyers are Telling us

Top Takeaways:
 
-It’s a buyer’s market in business sales in 2019
-Sellers that are open to vendor finance can sell much faster
-Anything priced above two times the owner’s benefit will likely sit on the market for a while
-Get more options to extend on your lease before you go on the market

There is no shortage of business buyers in the market. We’ve had around 10,000 people contact us looking to buy a business in the past 12 months. They’re just very selective about what they buy.

A lot of the businesses that are on sale in the market are at prices that buyers are not willing to pay. So, most of these business owners will either never be able to sell their venture or will have to adjust to the reality of the market.

Aligning price to market value

This doesn’t mean negotiating a lower price, because buyers won’t enter a negotiation if they think the asking price is too high in the first place. Rather, it means you need to advertise your business at a price that is close to what the true market value is – not tens of thousands or hundreds of thousands more.

The reality is that any business that is priced at more than two times the owner’s benefit (i.e. the total amount the owner makes) will sit on the market for a long time because 90 percent of buyers won’t pay that price and you’re looking for a buyer in only 10 percent of the available market.

A qualified business broker can tell you what your business can realistically be sold for and allow you to make an informed choice about whether you accept the price or whether you put your selling plans on hold and work on things that will generate a better net result when you sell in the future.

Looking at vendor finance

The problem with traditional banks is they’re willing to give us money when we don’t want it, but when we do want it, they make it so difficult or so much in their favour that they have managed to change the entire marketplace, especially in the world of business sales.

We are still able to help our buyers obtain finance through a variety of lenders – from banks to non-banks. But we’re having to get a lot more creative.

This is why when we have a new client looking to sell their business, we ask them whether they are open to vendor finance. The way vendor finance works is the buyer will take over the business and pay the owner incrementally over several months or years, rather than pay a lump sum upfront. The benefit for you, as the owner, is you can exit the business quicker, but the risk is the buyer might struggle to meet their repayment obligations down the track. Overall, if it’s set up and managed properly, it works out most of the time.

Extending the lease

Another thing to keep in mind is that buyers want to know the lease terms of the property the business is operating out of. So, if you’re wanting to sell your business, it would be a good idea to contact your landlord and ask for options to extend the lease.

You don’t need to tell the landlord that you’re planning on selling the business; it’s better to say that you’re planning on getting finance for another project and that the bank wants to see you’ve got a longer lease term in place for security.

 

For more details contact Finn Business Sales info@thefinngroup.com.au