Cheaper financing, better results spark business marketplace

This may be the time to put your small business on the market.

For one thing, financing tends to be available and, says Eric Dunn, “Money is really cheap.” For another, lots of calendar pages have turned since the recession savaged so many small businesses.

The problem, Dunn says, is finding good businesses to sell.

“There always are more sellers than buyers, but there are more buyers than good sellers,” agrees Karl Grasemann. What makes a good seller? A successful transaction, Grasemann says, is “always dependent on the profitability of the company for sale.”

Grasemann, owner of The Grasemann Group Ltd., Bartlett, and Dunn, managing director of Focus Capital Advisors Inc., Downers Grove, are in the business of buying and selling businesses. So is attorney Bill Price, though his Warrenville-based Growth Law practice touches a broad variety of small business issues.

Collectively, the three see the business marketplace pretty positively. Financing, as always, and, today, time matter. For sellers, that's good news.

Banks have become “more aggressive” with dollars to finance purchases, says Dunn. “Private equity groups are very aggressively looking for firms to put money into, (and) strategic buyers are more aggressive” as well.

Banks are a somewhat surprising source of financing. Bankers who traditionally want 100 percent collateralization “will sometimes loan a little more,” Price says. Although bankers continue to like the protection of Small Business Administration loan guarantees, Price sees “more conventional (non-guaranteed) dollars when banks can sell the loans.”

And Price agrees that “Private equity funds are interested. Some,” he says, “will invest with you — mezzanine financing. Others buy and sell.”

Part of the positive buy-sell outlook is calendar based, Dunn says. Potential buyers tend to look at a selling business' most recent three years of results.

“Buyers are looking for profitability and trends,” Dunn says. “Prior to 2012, sellers still had to explain 2009 (perhaps the worst year of the recession). But most businesses have three good years on the books now. 2010 was better than 2009; 2011 was better than 2010.”

Last year's results for most small businesses continued the trend.

Grasemann suggests that internal issues may need to be addressed before a business hits the marketplace. Buyers are there, he says, but “the circumstances must be right.”

Grasemann says, for example, that a business owner “may need to invest in the business' structure — building a sales staff to add value to a business or correcting a customer base that may be too concentrated” for potential buyers.

Price sees several different buyer marketplaces. One, he says, “is made up of people who want to buy themselves a job — individuals who have come out of corporate America” relatively flush with funds and looking for a new position.

Serial entrepreneurs, those who have built their existing business about as far as they want and are eager to move on to their next idea, are another important buyer-based market, Price says.

Ÿ Jim Kendall welcomes comments at JKendall@121MarketingResources.com

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