Buying a Business in the Current Market

We never could have imagined that a world-wide pandemic would have sparked a business buying frenzy here in Florida, but that’s what we have seen happen in 2020. It’s showing no signs of letting up anytime soon, as the population continues to swell in the Sunshine State. It’s been a buyer’s market for businesses here in Florida for years now, so this shift is quite a change from what buyers and sellers are used to. Here we will discuss what a seller’s market means for business buyers, and what type of a buying experience that buyers can expect in today’s market. 

 

Fierce Buyer Competition

From the end of February to the end of September, the buyer inquires on our business listings increased by 40%. We have had a record-breaking sale, and we have had more offers come in over the last 6 months than ever before. All of this elevated buyer activity has naturally led to increased competition among buyers. 

Florida is seeing an influx of new residents: people fleeing the big cities of the north, mid-west , and west in droves, looking for warmer weather and a cheaper cost of living. COVID has made people think about what they really want to be doing with their lives, and for many, it includes moving, a job change, becoming their own boss by owning a business, and wanting to have more control over their own destiny. Due to all of these reasons and more, the landscape of business sales for buyers has changed, and if you are looking to buy a business now, it’s important to understand that you will not be the only person considering a particular business listing, so you need to be prepared to make an offer as soon as you find a business that meets your criteria. If you wait, it could be too late. 

 

Low Inventory of Businesses For Sale

With a surge in buyers over the past year, many of the quality businesses on the market have been sold. However, living in a perpetual state of uncertainty has caused many business owners to put off listing their businesses for sale, until the dust settles from COVID. While that seems like a rational choice given the state of the world, COVID isn’t going to be disappearing anytime soon, and the business sales marketplace is begging for new listings. We have so many buyers, and not enough listings available for them to purchase. While we are all hoping to get more businesses on the market in the coming months, buyers have to watch the market closely for businesses that become available and move in on them quickly. More buyers are competing for a limited number of business listings, which not only means they have to act fast, but they need to bring their highest and best offer to the seller. 

 

COVID Discounts or Deals

We are not seeing too many “COVID discounts” out there, because the market is hot for businesses that are healthy. Typically, at least at Green & Co., we don’t normally list distressed businesses anyway. Businesses on average take about 282 days to sell, so if a business is suffering, not only will they not be attractive to many buyers, but they will most likely be out of business before we even get a chance to sell them. If we do have a distressed sale, it would most likely be an asset sale, where the owner is selling their business at their equipment value, like a closed restaurant for example. They are out there, and they do exist, but it won’t be the majority of the business listings that are available. If a deal and a steal is what you are looking for, keep an eye out for asset and liquidation sales.

  

SBA Lending

Getting an SBA loan to acquire a business is one of the major ways that business purchases are funded. While loans are still being granted by the SBA, the process is taking longer than normal (in some cases, closings have been delayed by 1-2 months). Also, lenders are being much more strict about the business’s financials (they need to be healthy and consistent numbers with years past), and they are requiring buyers to be highly qualified (good credit, 10-20% down payment, experience owning a business or experience in the industry that they are buying into). Of course, all lenders are different as to their criteria; however, the SBA establishes rules that must be adhered to. For more information about SBA lending, contact a lender for their expertise. 

 

Seller Finance

If you plan to purchase a business using seller finance or owner carry, be prepared to put down at least 50%. Because the market is so competitive right now, and it’s a true seller’s market, sellers know that they will be able to find a quality buyer and get a good deal. So, asking them to provide seller financing without being willing and able to put some real skin in the game as a down payment unfortunately won’t get you very far. 

 

A Business Broker Will Give You An Advantage

Working with a business broker to help you find a business to purchase, negotiate a good deal, and help you get across the finish line will be to your advantage more than ever in today’s competitive landscape. As a buyer, you don’t pay any commission to a broker, as our commission is paid by the seller, so it is really a no-brainer to get professional help that is free to you. 

A business broker who is a member of the Business Brokers of Florida (which we are) can put you on an auto-notification so that you are emailed when any new businesses hit the market. Furthermore, working with a Green & Co. business broker will give you an edge on new listings coming to the market that aren’t even listed yet. Our team of business brokers meets every single day, and we share our upcoming listings with one another, just in case anyone on the team is working with a buyer who might be a good fit for it. So many of our buyers get a heads up before a listing even goes live. If you are currently shopping for a business, get in touch with us today, so that we can start giving you that competitive edge.