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Today’s economy has stirred uncertainty across the business landscape. For founders looking to exit, that uncertainty creates a dilemma. Should they exit and risk getting shortchanged on a sale? Or should they stay on longer than they had planned to?
A closer look at the current market brings a startling revelation: contrary to what you may have believed, the mergers and acquisitions market for small and medium businesses is still very much alive.
Why Is It Still a Good Time to Sell a Small or Medium Business?
Now is not a great time to sell a larger business. However, there are still plenty of opportunities to sell small and medium companies. The reason comes down to one thing: the cost of debt.
According to Dena Jalbert, founder and CEO of Align Business Advisory Services, “The larger deals can’t obtain financing in today’s debt market, as that normally requires a syndicate of lenders to execute.” Small and medium business sales generally need only one lender for financing, so buyers won’t have much of a problem getting loans.
What Business Buyers Are Looking For
If you’re a founder hoping to exit, make sure that your small or medium business stands out to investors. Nearly every investor will look for these signs of value:
- Consistent revenue and profit growth
- Lack of customer concentration
- A strong management team
The way your company looks toward the future can also impact your chances of a merger or acquisition. Jalbert says that “Investors are seeking a high-performing company that has a leader that wants to take the business to the next level but knows it is easier/better to do that with a partner.”
Common Pitfalls Facing First-Time Founders
Founding and running a business is a learning experience. And if you’re a first-time founder planning an exit strategy, it’s wise to avoid potential bottlenecks. The most prevalent of these is a lack of complete, accurate financial statements.
One way to get your company finances in order is to hire a fractional CFO. Fractional CFOs are a great solution for smaller businesses. You get the benefit of professional financial guidance without needing to pay a full-time salary.
That’s not the only thing that can help. Jalbert suggests investing in financial infrastructure to ensure a profitable sale: “Investing in an audit at $50,000/year for 4 years can save a company millions of dollars at closing. That’s easy ROI.”
Knowing the importance of investing in financial infrastructure isn’t the same as knowing how to invest. Business advisory services can help you optimize your business’s finances, even far ahead of a sale.
Tips for Keeping the Transition Smooth
If you don’t plan ahead, exiting your business can be a bumpy ride. Think ahead with a couple of key points.
First, you’ll want to make sure there’s someone (and ideally more than one person) who can carry your business forward after your exit. Usually, that means having a competent and engaged team of managers.
Second, you should vet potential buyers carefully. Don’t settle for just anyone — you want a buyer whose values and goals line up with those of your company. If they do, your business is much more likely to be successful even after the deal has closed.
Complete Mergers and Acquisitions the Right Way
If you’re looking to exit your business, now is a great time. But if you want to maximize your chances of a great deal, you need a team of M&A experts by your side.
At Align Business Advisory Services, we help you prepare for your company’s sale and support you throughout the process. If you’re ready to sell or are considering it, please don’t hesitate to reach out.
