I read a report last week indicating that the business for sale market has shown some positive signs in the numbers of businesses sold in the last quarter and in other metrics. While better news is always positive, the fact is the overall sector has seen such a significant decline in the past three years that these improvements are still relatively meaningless.

There are still a lot of new businesses that get listed for sale and with unemployment not abating, the amount of prospective buyers continues to grow in the market. So with many prospective buyers and sellers, one would think that the market should be quite liquid with many businesses being bought and sold yet that is not the case. The lack of third party capital to finance these deals is certainly one reason however, even in the heyday of business for sale transactions, traditional banks never played a major role and so blaming any trends on the lack of financing is a poor excuse.

The reason why there is not a wealth of activity in this sector is the unrealistic expectations that are prevalent in the market today by sellers, buyers and business brokers.

Sellers who believe the market is flooded with all cash buyers are in dreamland.

Buyers who think they can acquire a solid business for zero money down are delusional. And brokers who think they can bully buyers into deals or not provide detailed financial information to prospects are fooling themselves. Additionally, when brokers attempt to utilize past business sale comparables as a sales tactic in today’s market, they embarrass themselves with an intelligent buyer.

Personally, I believe this is the most opportune time for buying and selling a business that I have seen in the past two decades that I have been involved in this sector. Despite the economy, there are factors in play on both the buy and sell sides that generally only influence one or the other. We have high unemployment, stock market volatility and low interest rates which typically incentify prospective buyers. On the sell side, we have an aging population, a market flooded with buyers, and the number of transactions below past levels which all typically lead to more motivated sellers. From a broker perspective, less closed deals means less commission and there should be no better motivating factor than that to propel a broker to try to get deals done.

Since deals simply are not getting completed commensurate with these issues, it is time for all parties to start looking into the mirror to understand the problems rather than outwards to blame the other parties or trying to suggest a lack of capital is the sole culprit here; that is too simple an excuse. Furthermore, if buyers, sellers and brokers are sitting on the sidelines until capital frees up, they will be waiting a long, long time to get into the game. There is an obvious solution: if all parties to the deal would simply adjust their expectations to realistic and rational levels and ramp up their creativity and logic when structuring these transactions and stop trying to “bs” each other, then deals are going to get done and at a furious pace I am certain.

Have a great week!