Can I sell my business in 2021? Many business owners, like you, want to know.
Many business owners are trying to understand how 2020 will affect their business value. Owners are more concerned than ever before for some of the reasons listed below. However, there are several reasons to be encouraged as well.
Before the Covid era, unprepared business owners still faced a challenge selling their businesses. Organizations like the Exit Planning Institute (https://exit-planning-institute.org) and articles in Forbes Magazine (The Business for Sale Marketplace — Why 90% of Listings Never Sell; Oct 24, 2016) showed that approximately of 80% businesses that go on the market struggle, usually failing to sell.
Business owners who received PPP hoped the influx of stimulus money would make their business more attractive to investors. But many valuation companies, lenders, and business buyers do not consider money generated from the PPP as a bottom-line benefit. Even when the PPP loan is forgiven, it is not a reoccurring revenue.
For some businesses, the PPP made all the difference of being profitable versus ending up in the red. As one client describes it, “I would have laid-off workers and not spent that money on labor if they weren’t providing the stimulus money.” I will leave any further discussion of the value of forgiven PPP funds for the valuation specialists.
It is also interesting that many prospective buyers are not giving much credit to the increased revenues some businesses experienced in 2020. While some companies faced dwindling revenues, others generated record sales.
For example, most restaurants were closed for at least some of 2020 and then reopened with sparse seating arrangements. But some carry-out pizza restaurants experienced significant revenue increases. Now that restaurants are fully open in many Florida areas, customers are returning to old favorites when they might have enjoyed a pepperoni and cheese from their local carry-out a year ago. Will some carry-out shopping habits remain? The pizza shop owners are hoping so, but business buyers are not so convinced.
So, is 2021 the year for you to sell your business? Consider the following facts, then decide for yourself:
1. For the first four-months of 2020, Tampa’s BBF (Business Brokers of Florida) agents sold 35 businesses. However, this year’s (2021) sales have nearly doubled for the same four months, with 65 companies sold!
2. The SBA has incentivized borrowers, offering steep discounts for borrowers for 2021. While this program is a limited-time offer, it shows the SBA’s interest in supporting small businesses. It also continues to spur Buyers to buy a business this year.
3. The average price of businesses increased by nearly 50% this year. That does not necessarily mean overall business value has increased. But it does show that buyers are seeking more valuable businesses.
4. Each day, over 800 people move to Florida, and many seek to own a business. While this just impacts Florida businesses, there are more overall buyers seeking companies moving to Florida. At least 30% of our Buyers have come from places like NY, Chicago, L.A., and abroad.
5. Spending is strong, and even the hardest-hit industries, like restaurants, are coming back strong. Many IBISWorld industry reports show increased sales expectations over the next five years. Optimistic business markets positively impact the demand for business acquisition.
6. Displaced corporate employees are looking for alternatives to going back to employment. At least 65% of our business buyers have left corporate America with the goal of applying the skills, training, and experience while calling the shots at their own business. While start-ups and franchises provide attractive gateways to entrepreneurship, existing companies let new owners focus on growth instead of worrying about when they will turn a profit.
7. Many say it is a Seller’s Market. As a result, the inventory of businesses for sales has begun to dwindle, providing strong demand for firms in the marketplace. One site we reviewed currently had about 2,500 listings in May 2021, but that same site has had as many as 4,000 in prior years.
So, now may be the optimal time to sell your business. The question is, are you ready? Is your business ready? Give us a call to help you figure out if the time is right for you!
Written By: brian stephens
Founded Legacy Business Sales and Acquisitions in 2004. Been helping present and future business owners along the east coast for two decades. More about BuyBizUSA.com.