Sales of small businesses hit eight-year high
Small businesses apparently are selling, both nationally and in the Chicago MSA (which includes Kenosha county in Wisconsin and four counties in Indiana). In fact, BizBuySell.com says sales nationally reached 2,090 in the third quarter, a 15.2 percent increase over 2015's third quarter and the highest level since the second quarter of 2008 -- just before the Great Recession arrived.
The median third quarter asking price for Chicago MSA businesses listed on BizBuySell.com was $270,000. Median selling price was $250,000.
Businesses are selling fairly quickly, too, BizBuySell.com says. Those sold in the third quarter were on the market for an average of 171 days this year, compared to 179 days a year ago and 188 days at the beginning of 2016.
As your economics professor once said, supply and demand are the reasons for the increased activity. BizBuySell.com says owners who waited out the Great Recession are eager to take advantage of seller interest. At the same time, fewer than one-third of today's likely buyers believe they will wind up with a better deal if they wait a year to buy.
BizBuySell.com is a web-based source of businesses for sale and brokers that sell them; the website has significant, and interesting, information. So, however, do local business brokers.
In spite of what seems to be a strong market, this may not be the week you hang a For Sale sign on the door. Most brokers and support professionals who work with small business owners suggest it will take at least three years -- five is more likely -- to get a business in a shape that will allow the selling owner to maximize the sales price.
"Business buyers want to look at three-to-five years of trailing financial data," explains Joel Goldberg, the Northbrook-based half of Goldberg-Heinze Business Advisors.
"Balance sheets tell it all -- cars, vacations, summer jobs for the kids." He recommends at least a five-year cycle that allows the business owner to make what often are necessary operational and financial changes that will make a business more attractive to buyers.
Price isn't the only consideration, either.
"I can't underestimate the importance of planning," says Jeffrey Smiejek. "Selling your business will have a tremendous impact on the next part of your life."
Smiejek is a partner at Porte Brown LLC, an accounting and advisory practice based in Elk Grove Village. He heads the firm's valuation and transition services practice group.
Two basic Smiejek tenets: Before hanging out the sign, owners should step back to analyze what they will need financially to retire. That's a process Smiejek says only about half the owners he sees have begun to consider.
The second tenet is to get an independent opinion of what the business is worth. Business owners almost invariably have an inflated idea of their company's marketplace value.
Both processes take time.
Smiejek also suggests a "conversation with other owners who have gone through the process. They'll have unique insights."
• Follow Jim Kendall on LinkedIn and Twitter. Write him at Jim@kendallcom.com. Listen to Jim's Business Owners' Pod Talk at www.kendallcom.com/podcast. © 2016 Kendall Communications Inc.