The fourth quarter of the year typically sees a slowdown in the business sale sector and it is something I never quite understood. In fact, this is actually an excellent time to make an acquisition
and so too is it a good time for a seller to exit for several reasons:
Regardless of the economy, the market is always flooded with people looking to buy a business. I say “looking” simply because most people will never complete a transaction however; that is immaterial. In the four quarter, many prospective buyers adopt the mindset that they will “wait until next year”. As such, the numbers of prospective buyers that are actively looking declines, and therefore sellers/brokers generally receive fewer inquiries.
Less buyers equals less competition and so it is easier to get the attention of sellers over the next few months.
Additionally, most people set mental calendars and use these dates quite frequently in my opinion not as goals, but rather to procrastinate over certain decisions.
It is very easy to use the fourth quarter holidays as a reason to defer buying a business.
Or, now, many people want to wait until the U.S. election is completed, or the new government takes over in the New Year. Again, merely excuses in my mind. I don’t want to be political but I am quite certain that the world will not fall apart regardless of who forms the next government so why wait?
On this note, for anyone so inclined to submit highly charged comments pontificating about your political beliefs and trashing the other people running for office as is the case when even the mere mention of anything quasi-governmental or political appears on this blog , don’t waste your time – this is a business blog not a political forum – thank you.
The Year is Almost Done
Many listings indicate annualized numbers when financials for a part of the year are presented. Annualized numbers are when the financials for a limited period (i.e. the first months of a fiscal period) are simply extrapolated out to present a 12-month picture).
This can result in very misleading figures as most businesses do not see straight line activity every month of the year. And so, if you just take the activity in a limited period it is nearly impossible to predict what will the end of the year look like.
However, we have now completed 75 percent of the year. Unless a business derives the bulk of its revenues in the last quarter (i.e. businesses who cater to the holiday season), a buyer can, at this point in the year, predict with reasonable accuracy how the remainder of the year will turn out. The key is to measure the current year’s three quarters versus the same periods in prior years to see how the business is trending. Then, take the fourth quarter activity from prior years as a percentage of those entire years and use that factor with this year’s to date activity to date to get a projection for the remaining months.
A New Year Is A Perfect Time for a Fresh Start.
For business owners who have put their companies up for sale, it is fairly common for them to have a targeted exit date and year-end is a highly desirable date for those whose businesses have been on the market from early on in a year. This is especially true for the more motivated sellers who want to avoid starting a whole new year of running their businesses. As such, with only ninety days remaining until the New Year, it is a very opportune time for them to hand over the reins to a new owner. Similarly, a new year is a perfect starting point for a new career, hence serious buyers can see it as a perfect launch date although I believe that ANYTIME is a good time to buy a good business.
If you are serious about buying a business, take advantage of these factors and set a goal of getting a deal done by the end of the year. It is realistic and achievable and one thing is certain: you will start the New year with an incredible level of energy and enthusiasm which is a very exciting though don’t you think?
Have a great week.