While the decision to sell your business should be based on a careful analysis of many factors, there are several reasons why the next 12 – 18 months may be a particularly good time to sell.
1. US personal tax rates remain low. The current tax rates on dividends, capital gains, and even personal income remain relatively low. Yet, with mounting national debt, rising interest rates, and public demand for more and more government services, it seems likely that tax rates will almost inevitably rise in the foreseeable future, regardless of who becomes the next President, or which party controls Congress. Your tax accountant is your best source of information on how this might affect your personal tax situation, and later this year as you’re finalizing your 2016 YE financial statements and planning for your 2016 tax bill would be a good time to ask.
2. 2016 has been a good year for many small businesses, and 2017 is expected to be good as well. Revenues have slowly returned to pre-2008 levels, and more importantly, many businesses have shown dramatic improvement in their bottom line and cash flow. Stronger cash flows drive higher valuations, and higher selling prices.
3. Buyers are numerous and well-funded. Strategic, corporate buyers are reporting record profits and have very strong cash positions and balance sheets. Private equity groups (PEGs) and family offices continue to be very well funded and are aggressively chasing what few quality companies are on the market. Community banks, as well as the large, national banks are eager once again to provide acquisition financing for small, privately held companies. International buyers are still aggressively pursuing acquisition of US companies.
4. Don’t want to miss this business cycle. Many business owners I talk with were thinking of selling just as the Great Recession arrived, and have been forced to delay their retirement and put all of their energy into successfully navigating their business through the most recent downturn and have no desire to do it again. It’s difficult to predict when the next economic downturn might occur; or how long it might last, so now may be the best time to act.
5. Market may shortly be flooded with Baby Boomer sellers. As record numbers of Baby Boomers reach retirement age over the next 12 – 15 years, some observers predict that the market will quickly become flooded with Baby Boomer-owned businesses that need to be sold. One author estimates that $10 trillion of business wealth will change hands as the Baby Boomer generation retires. Should the supply of businesses available for sale exceed the demand, it will likely have a depressing effect on valuations and selling prices.
If you or someone you know is a business owner who’s thinking of selling or buying a business and who might benefit from a complimentary consultation with an experienced M&A advisor, have them contact any of the M&A professionals at (888) 864-6610 or for more information about us, visit our website at www.transworldma.com.