Sit-Down Interview With Business Broker Andrew Rogerson

What are your thoughts on where business acquisition & sale market activity is heading over the next 3-6 months?

The COVID-19 Pandemic is creating a patchwork of changes to small businesses.  

The US Congress through the CARES Act is unleashing over $2 trillion in the stimulus.  Interest rates have been cut so lenders can offer finance rates to small businesses that are the lowest we have seen in decades.  The SBA through the Economic Injury Disaster Loan and the Payment Protection Program loan plus other initiatives are trying to support small business.

The market I service is in California.  On March 19 2020 I successfully closed the sale of a manufacturing business and continue to see buyer interest in HVAC, computer cabling, and other businesses I have for sale.

What do you see as the most significant SELF-IMPOSED threats out there that could hurt the market for business acquisition & sale and small business activity in general?

The 'New Normal" economy is still revealing itself.  California is now starting to open up but will need 3 to 4 months to see what's happening and the true impact of the COVID-19 and the Lockdown Recession we are currently navigating.

There is no question we will recover.  The question is how long it will take and the new opportunities it creates.

What do you see as the top three things the government needs to do to support main street business acquisition and sale opportunities for small business owners through the remainder of this year?

The US government is doing a lot.  The State of California though Go-Biz is also assisting.  The California economy is exceptionally diverse with the IT sector, and the 6th largest economy alone in Southern California.  Plus the Central Valley of California exports approximately 45% of its agriculture products into the other US States.

Despite its reputation, California is a positive place to do business.  You just have to be willing to step through the red tape and its demands when doing business.

What do you see as the top three reasons to BUY a business in 2020?

The top three reasons to buy a California business, in my opinion, are:

1. The US Federal Reserve has unleashed an unprecedented amount of stimulus into the economy by dropping interest rates at their lowest level in decades.

2. The US Congress has added to the Federal Reserve stimulus bypassing the CARES Act, the $1200 per person household stimulus and it looks like more to come.

3. Business owners that were close to retiring are now more motivated to sell and move to the next chapter of their life.

What are some of the questions a business owner should ask when choosing an advisor to help buy a business or work on exit planning to help navigate through this challenging stretch?

The work I do is primarily on the selling side of businesses located in California. Therefore, I want to see accurate financial statements, a clear understanding of the seller why they wish to sell, a business that is at least steady and must have potential; even if the seller is not as motivated as they were previously.  Most important though, there must be trust between both parties.  There are so many challenges selling and buying a business and all parties in the transaction need to be open and honest with each other or the deal will not happen.

How would you rate the current political environment related to small business growth, business acquisition & sales?

3/5

What are your thoughts on transaction terms for buyers & sellers in the current market?

A very interesting question but I don't think can yet be answered.  The economy has been locked down since mid-February 2020 and this has never been done before.  Some businesses have grown because of the lockdown, some have seen little change and many specific industries such as restaurants, bars, the travel industry and more have been severely damaged.  Manufacturing businesses will return to California due to its diverse labor force and the need to bring jobs back to the state.

Thoughts on business valuations in today's market?

Business valuations, in the short term, will not change very much as there are no metrics to show what is happening.  As I am a business appraiser my training is to 'normalize' the performance of the business because this 'Lockdown Recession' closed the economy so quickly, unemployment spiked but programs have been put in place to try and create a V shape recovery.

We live in interesting times.