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After only slight increases from the middle of the recession in 2009 to 2012, 2013 saw a significant bump in the number of small businesses changing hands. The economic recovery, strong supply and demand fundamentals, improved lending options and continued improvement in small-business financial performance all combined to create the best transaction market in many years.
BizBuySell.com data showed that business-for-sale activity jumped 49 percent in 2013 compared to 2012. Additionally, small businesses are bringing in more revenue with improved cash flow. As a result, the median sale price is the highest it's been since before the recession.
But what does all this mean for selling a convenience store in 2014? Here are a few key issues to think about when considering a sale this year.
Business brokers expect more sellers, transactions in 2014
A BizBuySell.com survey of business brokers across the nation in December showed that 83 percent of respondents feel even more small businesses will be sold in 2014 than were sold in 2013. The reason brokers are feeling confident about small-business transaction growth in 2014 is the increasing number of Baby Boomers who are reaching retirement age and interested in selling their businesses.
In fact, 50 percent of surveyed brokers estimated that more than half of the 2013 small-business transactions were attributable to retiring Baby Boomers. While that is already a high number, brokers expect it to climb even higher this year. Seventy-six percent of respondents believe the number of Baby Boomers who will sell their businesses this year will outpace the number of owners who sold their companies in 2013.
Finally, more than half of the brokers surveyed feel that newly implemented Affordable Care Act regulations could encourage more small-business owners to sell as they look to avoid the extra costs and administration associated with the new laws.
If you’ve been waiting to sell, 2014 may be the year to pull the trigger
Part of the reason brokers believe so many sellers will enter the market in 2014 is that many owners, including Baby Boomers, have been waiting out the recession.
We’ve heard from many owners who were readying their businesses for sale prior to the economic downturn and then unfortunately, declining financials and a slow business-for-sale market forced these owners to put their plans on hold and simply wait it out. Instead of listing their companies, they focused on keeping their businesses afloat and delayed their exits for a time when they were more confident about receiving an acceptable sale price.
Based on the 49-percent increase seen in transaction volume in 2013, that time appears to have come. The median revenue and cash flow of businesses has continued to rise as small-business performance has strengthened, making owners more confident that they have a sellable asset. At the same time, improving financials are giving prospective buyers more confidence that now is the right time to buy a business. In addition, improved lending and personal wealth environments mean there are more qualified buyers with sufficient means to buy a business.
This combination of pent-up supply and demand plus favorable economic conditions is creating an increasingly strong market that, barring something unforeseen, should continue for some time to come.
So, with that in mind, if you were one of the business owners waiting out the recession to start the sale process, good news: the business transaction market is healthy and 2014 may finally be the year for you to sell your business and move onto your next challenge -- be that another entrepreneurial venture or finding the best beach on which to enjoy the fruits of your labor.
If you aren’t itching to sell, growing with the economy could pay off long-term
For those who have the energy and the will to keep at things longer before selling, consider that the high levels of business-for-sale activity are likely to continue into 2014 and beyond. Simply put, after the five-year-long Great Recession, it will take time to work through the backlog of supply and demand. So, for patient sellers with growing convenience store businesses, this could mean even higher sale prices down the line as supply gradually tightens and sale-price multiples rise.
Of course, waiting to sell also comes with risk and, likely, a fair bit of hard work. Simply keeping the business running won’t automatically lead to a higher sale price, even if the economy continues to improve. Unless your store keeps pace with (or hopefully outpaces) competitors, it's possible your business may be worth less money in the future. There's also, of course, the risk of another economic downturn, which would lower business valuations across the board.
Analyze which decision is right for you based on motivations, financials
To decide if you should sell in 2014 or continue to grow your business with a strengthening economy, you must objectively value the current state of your business, its prospects for the future and, perhaps most importantly, your personal motivations.
If your store is financially strong, yet you are losing the motivation to keep driving it forward, then the best option may be to list your company and take advantage of today’s greatly strengthened business-for-sale market. Conversely, if you have the energy to carry on and your store has room for growth, now may be the right time to invest in improvements.
Taking the time, money and energy to document internal processes, grow your customer base or even make physical renovations can all help increase your business value. If the business-for-sale market continues to improve with the economy, you may also benefit from an increase in the number of prospective buyers for your business, with better access to capital than today’s buyers. Furthermore, in such conditions, supply will eventually tighten, driving up sale prices.
Regardless of when you decide to sell, there will always be competition. In good times, there may be more buyers, but there are also more sellers with strong listings. So, whether you are selling now or later, you need to identify ways to differentiate your convenience store from your competitors.
Overall, 2013 was a great year for the business-for-sale marketplace and it appears the momentum will continue in 2014. Whether you choose to take advantage of the healthy sales market now or continue to ride the economic recovery in hopes of creating even more value should depend on your business’ condition and prospects and, perhaps most importantly, your personal motivations, risk tolerance and goals. However, regardless of your sale-timing decision, 2014 is certainly the right year to start preparing your convenience store for sale.
Curtis Kroeker is group general manager for BizBuySell.com, the Internet's largest and most heavily trafficked business-for-sale marketplaces. BizBuySell currently has an inventory of approximately 45,000 businesses – spanning 80 countries – for sale at any one time and receives more than 1 million monthly visits. Visit www.bizbuysell.com for more information.
Editor's note: The opinions expressed in this column are the author's and do not necessarily reflect the views of Convenience Store News.