If you have been thinking for a while about the possibility of selling your business, 2015 could be the year for you to pull the trigger.
The Great Recession is in the distant past for most businesses which means that business sellers no longer have to make excuses about one or more poor years in the 2008 – 2010 period. Most banks and business buyers concentrate their analysis and business valuations on the past three years. So with 2014 wrapped up, most businesses can boast four (2011-12-13-14) consecutive solid years. Business valuations are no longer negatively impacted from recessionary periods.
Business buyer confidence is literally off the charts. With most businesses looking at another solid year in 2015 and business conditions in most industries looking favorable over the next several years, buyers’ interest in a timely business purchase is the strongest we have ever seen. In addition, buyer confidence brings out even more prospective business buyers. Parties who have been contemplating a business purchase for years are coming off the sidelines and are intending to buy a business in 2015. If there is a “buyer problem,” it is due to too many buyers, not too few.
Having lots of prospective buyers can generate multiple offers on businesses which we saw in 2014 for the first time since 2007. There is, however, a caveat about having a plethora of buyers: more buyers mean a greater time commitment required of the sellers as all buyers need to make business site visits and attend meetings with sellers.
While banks are often still difficult to deal with, each year reflects a softening of many banking negatives making financing a deal now the easiest it has been since 2007. And of course with bank rates continuing at historically low rates, buying a business now can lock in these highly favorable interest rates.
Most business sales are taxed primarily at the continuing low (Federal) 15% capital gains rate. Most economic pundits feel it is not a question of “if,” but “when” and “how much” capital gains tax rates are increased from the current 15% rate.
So, in 2015 a potential business seller will benefit from a combination of (a) higher valuations due to excluding poor results from recessionary years; (b) higher valuations due to recent strong results for most businesses; (c) strong business buyer interest; (d) favorable banking climate; (e) low interest rates; and (f) low capital gains tax rates..