Even people outside the business sphere have heard about buyer’s and seller’s markets. But in a continually fluctuating business landscape, how do you know what kind of market it is at any given moment? Here’s how to find out.
Look Inward, Not Outward
Outside factors certainly carry some weight when it comes to determining whether it’s a buyer’s or seller’s market. But the truth is that every market is a seller’s market when you have a solid business seeing reliable growth. Even if you’re selling your business when it’s not a “seller’s market,” there are always buyers looking to purchase successful businesses.
Of course, if you’re looking to sell, you should have an accurate business valuation first. Sunbelt’s free business valuation calculator can help.
Check Out Interest Rates
Some determined buyers are always ready to make a purchase. But when rates on business loans start to climb, other buyers might be dissuaded.
This is especially true if you’re selling a business with generally poor — or even average — performance. When a buyer invests in a less-than-successful business, they’re taking a risk. Why amplify that risk with a high-interest loan?
Pay Attention to Your Business’s Performance During Downturns
Selling your business during an economic downturn can be difficult, but it’s not impossible. That being said, you’re more likely to land a sale if you can make sure your company is in top financial form.
Suppose that the market is already in a downturn and your business has lost key employees, is chronically understaffed, or has faced recent lawsuits or bad PR. In these cases, your chances of selling will be significantly diminished.
What if You Don’t Have a Positive Cash Flow?
Essentially, even if the current climate wouldn’t be viewed as a seller’s market, you can still make a sale if your business is on solid ground. However, it’s also important to make sure you’re setting a reasonable selling price. If a buyer thinks they’re getting a great deal, they’re much more likely to buy.
What if you’re planning on selling your business but don’t have a positive cash flow? It will take some time and effort, but there are a few steps you can take to improve cash flow in preparation for a sale:
- Negotiate better terms with suppliers if possible
- Offer customers early-payment discounts if applicable
- When possible, lease equipment instead of buying it
- Consider using a business credit card instead of cash for certain purchases
Taking steps to improve your cash flow before a sale is always wise. But in some cases, you might not be able to take your cash flow from negative to positive in time. In this case, at least make sure that any would-be buyers can clearly see your company’s growth potential. Some buyers enjoy the challenge of turning struggling businesses into successful ones.
You might consider other ways to make your company more attractive to buyers as well. For instance, maybe your management team has agreed to stay on, or the buyer can also purchase your existing inventory for a greatly reduced price.
Considering Selling Your Business?
Making a sale in the current climate might be daunting, but the right business broker can make it happen. At Sunbelt Business Brokers, we specialize in connecting sellers of small and medium businesses with committed buyers. We can help you negotiate a favorable deal structure so you get what your business is worth.