The boom ahead

Signs of life emerging

I’ve been saying it for a couple of months now, and lately a few other voices have joined the chorus: The time to sell/buy a small business is now or is coming very soon. Take advantage of the improving conditions by making sure your small business is in top form.

The following item appears this week in Bloomberg’s Business Week, involving an interview by Karen Klein with mergers and acquisitions specialist Bill Roman:

There are eager buyers for small and midsized companies whose owners have powered through the recession and expect to see demand rebound this year. That’s according to Bill Roman, the managing director of the Boston office of Harris Williams, which advises middle-market companies on mergers and acquisitions and focuses on sales in the $25 million-to-$1 billion range. While business sales fell dramatically in 2009, Roman says Harris Williams is seeing deals pick up in 2010. With few business assets in supply and high buyer demand, valuations for high-quality companies have held surprisingly steady, he tells Smart Answers columnist Karen E. Klein. Edited excerpts of their conversation follow.

From a Q&A:

Is there anything specific that a business owner can do to improve a company’s valuation?

A lot of what’s required is outside the entrepreneur’s control. The biggest driver of whether you’re going to be able to sell your business is your sales growth. You can try to improve that through marketing. And you can assess what your order book looks like and whether your quotations are up. An early indicator of a good valuation is your quote rate trending up, compared to prior sales periods.

Is there pent-up demand for new mergers and acquisitions?

Absolutely—both from strategic or corporate acquirers and from financial buyers. So many business owners are sitting on the sidelines because their business has softened. The corporate development people at the large corporations augment their organic growth with acquisitions, but they haven’t been able to find quality companies recently.

The above information gives you some of the why on selling your privately owned company as the economy starts to recover from the Great Recession. I offer the how in my book, How to Sell Your Privately Owned Company: A Basic Guide for Independent Business Owners – Baby Boomer’s Edition.

I’ve seen economies cycle through boom and bust periods, and chances are you have too. The time to act is in the beginning of the boom, not at the tail end as it runs out of gas. That’s why it’s important to start now.

Eric R. Voth is a serial entrepreneur, a private investor, consultant, and writer. He is author of How to Sell Your Privately Owned Company, a Basic Guide for Independent Business Owners, Baby Boomer’s Edition. Eric and his colleagues help a business Seller prepare and groom his or her company prior to offering it for sale or merger – then guide the owner through the actual process. He became involved in this field as a result of merging his own company in 1993.


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