24 Jan Around the Web: A Week in Summary
A recent article posted on BizBuySell.com entitled “Small Business Transactions Reached Record Highs in 2017, up 27 Percent from 2016, According to BizBuySell.com Report” summarizes the findings of their Fourth Quarter 2017 Insight Report which shows that annual small business transactions reached record highs in 2017. The report states that in 2017, the number of business-for-sale transactions exceeded those in 2016 by 27 percent and this year-over-year growth rate is the largest since 2013.
BizBuySell also surveyed thousands of business brokers to find out why they think there has been an increase in transactions and the top reasons were: improving small business environment, increasing number of owners looking to sell, and increasing number of qualified buyers on the market. Overall the data shows a positive broker sentiment with stronger business financials.
According to the report, the Q4 data also showed improved financials with increased median cash flow, increased asking prices, and increased median sale prices, which suggests that this momentum will continue well into 2018.
A recent article from the M&A Source entitled “Private Equity Recapitalization: Sell Your Business Twice!” explains how a private equity recapitalization allows a business owner to sell part of their business to private equity (PE) partners while still being involved in the continued growth of the company. PE firms can provide their industry, operational, and organizational expertise to help increase the value of a business, which in turn allows the owner to profit a second time when the business is sold again.
There are a few risks involved in a PE recap which include:
- The business owner is no longer the boss as the PE will set up an advisory board and new management team.
- The company will carry a substantial amount of debt after the transaction.
- The value of the company on the 2nd exit is not guaranteed.
- There is risk involved in choosing the wrong PE partner, so the business owner should verify the track record of the PE to determine the probability of success.
It’s good to know your options as a business owner and to know the risks involved in a technique like a PE recap. If you’re optimistic about your business’ future, then a PE partner could be a good solution for you and your business.
A recent article posted by Business.com entitled “Why It’s Prime Time to Buy a Business from a Retiring Baby Boomer” gives several good reasons why it is a good idea to consider purchasing an existing business, as a flood of baby boomers will be looking to sell their businesses and retire over the next decade.
There are many benefits to purchasing an existing business:
- Minimal upfront costs and you not only purchase the business but also the brand, customer-base, management policies and more.
- Low risk because the business is already established and has a proven track record.
- Steady cash flow along with employees and equipment.
With the generation of baby boomers looking to sell, there will be ample opportunities available for buyers. It’s important to stay in the loop and keep an eye out on available businesses by staying connected to your professional network, brushing up on local & industry publications, looking at online marketplaces, and working with a business broker.