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Selling a Business in a Down Economy

By: Steve Skrlac Click author's name for more of his/her articles

The decision to sell your business can be a difficult decision to make in the best of times. It is uniquely difficult to make this decision when the economy is in the state that it currently is in. This article examines what you can do as a business seller if you need or want to sell a business when the economy is in a recession.

The first point that needs to be made is that there is still economic activity occurring. In spite of all the news coverage to the contrary, homes are still being sold, the vast, vast majority of people are still working (and spending) and our consumer culture is not going away. There is still demand for good small businesses for sale… even in a down economy. What you need to do as a business seller is determine what you need to do to stand out from the crowd to sell your business, sell your business for a good price and make the transaction go as smoothly as possible.

The first recommendation would be to not try to go it alone, but to retain the services of a reputable business broker (also referred to as a business intermediary). Business brokers get paid by a commission on the sale of a business – if there is no sale, they don’t get paid. When you retain the services of a professional business broker you automatically get a professional member on your team who is highly motivated to sell your business as you are.

Work with your broker in the early stages to see what can be done to improve the marketability of your small business. All too often, business are simply put on the market with very little thought as to how they will be perceived by potential buyers. Ask yourself, is the business’s location as clean & presentable as it could be? Do you have up to date financial information prepared, including relevant tax returns, bank statements, inventory lists, employment remittances, etc.? In the province of Ontario business owners must follow very specific rules regarding taxation filings, licensing requirements if applicable, environment and waste disposal methods and employment rules & regulations. A well organized and presented business will go a long way in an economy.

The other thing you can do to improve you odds of selling a business in a down economy is to set a realistic selling price. It’s important to set a fair price that will attract buyers – not scare them off. Often, inexperienced business sellers will set a business selling price that is too high in the hopes that they will ‘get lucky’ or eventually land on a buyer. What often happens instead is that a business does not sell very quickly. Interested buyers who may have been interested at a more reasonable price will pass over your business and move on to the next opportunity. It is critical to set a business selling price that is marketable. Usually, business brokers assist in helping sellers set a selling price using proven methodologies to value a small business.

Some business sellers balk at the prospect of using a business broker, citing the commission as being a factor. Business brokers, however, provide significant value that usually greatly outweighs the value of the commission. From finding a buyer for your company confidentially, to helping you set a reasonable selling price, facilitating the negotiation, due diligence and closing – a business broker is the key professional that will be able to sell your business quicker when the economy’s down and get you the right purchase price for your business.

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How to Sell a Business is author of this article on Business for Sale. Find more information about How to Sell a Business here.