01 Aug Leveraging The Market Pulse Report Survey to Support Your Clients
In our last article, we covered key information from Lisa Riley and Scott Bushkie discussed during the recent BBP webinar, which discussed information from the latest Market Pulse Report Survey. One key piece of data discussed was the labor shortages and supply chain situation, as these issues have continued to be problematic for businessowners. Riley and Bushkie noted that many businesses, such as restaurants, have shut down due to labor shortages.
Using Surveys with Your Clients
Through leveraging Market Pulse Report Surveys, business brokers and M&A advisors can give their clients an idea of what to expect regarding the process of selling their business and how to value their business. As Riley and Bushkie point out, being able to have third party data is a “lifesaver” when it comes to educating a businessowner in regards to the reality of their situation. Reliable third-party data can serve as an invaluable tool for avoiding friction between a broker and businessowner.
A Seller’s Market
The survey also indicates that it is a seller’s market and that record setting multiples have been occurring. In Q1, an impressive 97% of businesses were receiving their asking price. Riley and Bushkie noted that for larger deals, it isn’t necessary to establish an asking price. The client and the broker typically agree on the price, but don’t tell the seller the number.
With this in mind, business brokers and M&A advisors are finding that they are receiving premiums right now. However, you should point out to your clients that nothing lasts forever. Now is the time to jump in and sell a business before burnout sets in or everything “goes downhill.” Riley and Bushkie commented that private equity groups are noting that they are seeing the highest multiples in 35 years.
Educating your clients continues to remain of paramount importance. Business owners need to realize that the likelihood of a fast sell is very remote. It’s also important to educate your clients that even under the best of economic conditions, it will take many months, if not longer, to sell their business. There are many factors currently benefiting sellers, such as low interest rates, SBA involvement, and people not wanting to work for corporations. You can use this strong interest in owning a business as yet another way to encourage businessowners who keep waiting for “the right moment” to begin the process and put their business on the market.
The Profile of Current Buyers
The survey also indicated that Main Street buyers not only include the “typical” first-time business buyer. These individuals are often looking for a job in the form of owning a business. Serial entrepreneurs who have made money off of previous deals are also now seeking to jump back in and buy another business. The survey indicates that about one-third of buyers who purchased businesses in the $500K to $1M range are serial entrepreneurs.
Additionally, there is a great deal of money flooding into the industry. The money is mostly coming from private equity, family offices, and corporates who built large war chests. Feeling burned by the lack of bank credit by the 2008-2009 economic downturn, these buyers don’t want to get caught in a similar situation again.
Ultimately, you can use the information contained in the Market Pulse Report Survey to help your sellers in a range of ways. It is vital for you to work to help sellers to understand that the time to sell is when the market is hot and before they are burnt out. These steps can make a tremendous difference toward fostering a positive final outcome.