From the Trenches - Interview With Illinois Business Broker Larry Swanson
Sit-Down Interview With Business Broker Larry Swanson
What are your thoughts on where business acquisition & sale market activity is heading over the next 3-6 months?
I believe there will be a rush to complete SBA loans before the September deadline, but after that, I feel we will see a slowdown in Buyer activity. For the remainder of 2020, many businesses will be trying to figure out what the market will be like and how it will impact them.
The start of 2021 will see a jump in new business offerings with a large group of these businesses in real trouble. These will likely not end up being sold and the number of closings will be exceptionally large.
I also see several long-term businesses that have survived the crisis coming to market in early to Mid-2021. These will be the businesses that the sellers have weathered the storm but are now tired and ready to move on. Many of these will be great opportunities for buyers to get good to great businesses at reasonable prices.
Interested to learn more about what drives business value?
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 unknown direction of the market for many business segments will prevent many owners from investing in their businesses.
This will make them less attractive to buyers. The unknown future of this health crisis will cause many owners to lose confidence in their ability to survive. This will lead to more small business failures and more troubled businesses showing up in the marketplace.
What do you see as the top three things the government needs to do to support the main street business acquisition and sale opportunities for small business owners through the remainder of this year?
Main Street businesses are facing the most challenging time they have seen in years.
The government support they receive will be the difference between many surviving or closing.
The health crisis must be controlled. If a second shutdown occurs it will be devastating for many businesses.
The government’s actions to prevent another shutdown are critical. This will be a difficult effort for every level of government.
This is the most important issue the government sector must overcome. Financial support will always be needed and any other programs to extend the obligations for Main Street businesses will have an impact.
What do you see as the top three reasons to BUY a business in 2020?
Their reasons for owning a business have not changed. The main reason to buy a business is that everything is already in place for that business. This includes:
Employees and customers already in place.
An established brand.
Focus on growth and not survival.
The lower risk than starting a business from scratch.
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?
Business owners should ask advisors the following questions:
What is the broker’s business experience?
Have they done exit planning for other businesses?
Have they ever owned a business?
Do they understand the financial side of a business?
Are they interested in your goals?
How would you rate the current political environment related to small business growth, business acquisition & sales?
2/5
What are your thoughts on transaction terms for buyers & sellers in the current market?
The unknowns for small businesses are impacting all sides of transactions. The risk levels are harder to define and the time for some return to normalcy is unknown.
Business owners don’t know when or to what level sales and profits will return. This works against sellers and is causing buyers to expect a discount.
Earn-outs are one of the best ways to address this uncertainty for both sides.
Seller financing is also a critical component for sales in Illinois.
Thoughts on business valuations in today's market?
Business multiples are trending lower and will continue to move lower until some stability returns to the markets. There is a heightened interest in current comps by all parties to better understand what types of deals are actually closing.