2014 Sellers’ and Buyers’ Market

How the interests of buyers and sellers are causing the stars to be in alignment for both parties

by Dave Driscoll 

In business the term alignment is an expression of opportunity...“The deal just happened. The stars aligned!” Alignment in a deal is exciting for both seller and buyer; the deal was just meant to be. I believe 2014 will present those opportunities for sellers as well as buyers. Here are the indicators we are seeing in the community as well as the market.
Business owners rocked by the 2008 crash and the recession that followed have experienced improving business conditions over the past couple of years. Owners may not be back to pre-crisis confidence, but they are feeling more secure in their businesses. They aren’t as in love with their business as they were pre-2008 and have, through the battle, developed a more realistic opinion of their business as well as its value.
Another factor in the alignment indicator is that owners are older. Owners who might have been feeling it was about time to transition out of the business prior to 2008 are now six years older and have just been forced to work harder than they did when they were 20 years younger. I will tell you as a “seasoned” owner myself, you run out of energy and begin to ask yourself, “Is this worth it? Where am I going?”
The final element of seller alignment: owners are focusing on the quality of life in their “Life Beyond Business,” including retirement assets, family, travel, etc.
Now for buyer alignment. Many younger professionals have been working within constrained organizations during the six past years. Working harder than ever, having been told by ownership that their day will come, and it hasn’t. They may be thinking if they are going to work this hard, they should be working for themselves. The anxiety within is the fuel that helps develop the courage to take the first step into owning a business.
Interest rates are at historical lows with no near-term signs of dramatic increase. Banks are looking to loan to businesses with proven track records. New business start ups are risky business for lenders so they’re more interested and comfortable funding established businesses. The SBA is doing their part to actively support small business with tailored lending programs. The government recognizes the power of small business in our economy and is encouraging growth.
Another point of alignment is owner financing. Reflecting on the fatigue from the past six years, owners are more willing to participate in getting the deal done by assisting in a portion of the financing. In some cases, owner financing is what makes the deal happen. Deal structure often includes buyer cash (or equivalent), lender financing and owner financing. Lenders love the peace of mind that results when a portion of the financing comes from sellers because then the seller still has a vested interest in the success of the deal.
I’ll give a tip to those buyers considering requesting the owner’s help financing the deal: be sure the seller has a substantial payday at closing. Asking a seller to finance the majority of the selling price won’t fly; the seller financing portion of the deal should be only 20% to 30%.
According to the Merriam Webster Dictonary, opportunity is a favorable juncture of circumstances. In 2014, opportunity will be created through the alignment of seller and buyer interests. The passing of the baton of business ownership and leadership from the current generation to the next will be off to a strong start. Exciting times for all.

Dave Driscoll is president of Metro Business Advisors, a business brokerage, valuation, and exit planning firm helping owners of companies with revenue from $2 million to $15 million sell their most valuable asset. Reach Dave at DDriscoll@MetroBusinessAdvisors.com or (314) 303-5600. www.MetroBusinessAdvisors.com Visit Metro’s website to determine if your business is sellable!