From the Trenches - Interview With Virginia Business Broker Hal Feder
Hal Feder
Current market perspective from the trenches of the business acquisition & sale industry
Sit-Down Interview With Business Broker Hal Feder
What are your thoughts on where business acquisition & sale market activity is heading over the next 3-6 months?
I am seeing brisk activity and engagement from both buyers and sellers but the interest levels are very business category-dependent. By this I mean there seem to be 4 main groups of businesses:
Thrivers: businesses that are essential and doing better than ever within the COVID landscape.
Survivors: businesses that are experiencing an adverse short-term impact, but will come back to pre-COVID performance over time.
What I Worry: businesses that have not been very impacted by COVID either up or down.
Demise: these are businesses that will not be able to survive the impact of COVID and the related economic disruption surrounding the virus.
I expect the next six months into 2021 to continue along with the "cautiously optimistic" mindset. The buy-sell market seems to have digested the news and adverse impact of the virus, and despite, the rise of infections and deaths in certain geographies, I think business owners and prospects believe in the strength and resiliency of the underlying favorable economic fundamentals of the marketplace.
The promise of an effective vaccine and improving therapy outlook is also a positive which provides an air of hope that come 2021 we can return to a pre-COVID pace.
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?
Attitude determines altitude ... business owners need to adapt, be flexible, and learn important lessons from the current market challenges.
Why waste a good crisis? Seriously, 2020 is shaping up to be a great litmus test of adaptability and survivability for all of us. What can we learn from these challenges now that will better position us in the future? I will give you an example .... after spending 35 years in the global auto business, I specialize in valuing, marketing, and selling franchise automotive dealerships.
Before COVID, many auto dealers were reluctant to get into digital selling in a meaningful way. The virus came and changed all that.
Auto dealers were "forced" to find new ways to sell products in a touch-less manner. The virus challenge enabled a sea-change of new methods, processes, and initiatives that will improve the way customers choose to buy vehicles. Event + Reaction = Outcome. The reaction to a difficult event has now led to a positive outcome for both dealers and their customers.
The greatest self-imposed threat is everything that lies between our two ears!
POSITIONING FOR A SUCCESSFUL EXIT
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?
Develop a fast and simple way for business owners to get their PPP loans forgiven. It worries us when I see a one-page form to obtain the loan and a ten-page form to get forgiveness for the loan.
Provide banks with guidelines to facilitate the sale/transfer of business when a PPP loan is still active and not yet forgiven. Businesses are bought and sold every day including during a global pandemic ... help us help the business owners!
Continue to monitor the market impacts of COVID and act swiftly with new programs if and when they are required. Small business is the lifeblood of the USA economy and can lead us back to full recovery if we continue to support them.
What do you see as the top three reasons to BUY a business in 2020?
There are vast numbers of great businesses for sale right now. The boomers are retiring in big numbers and demographics are driving excellent business inventories and opportunities.
Interest rates are near historical lows which greatly improves business affordability. This fact coupled with banks having available capital and an aggressive leading posture set up nicely for buyers.
In the auto sector, the shift to electrification, autonomous vehicles, and ride-sharing platforms is driving a lot of industry disruption. Where there is disruption, there is an opportunity. Right now it seems as if half the dealers are looking for the exit door, and the other half wants to consolidate operations and get bigger. Depending upon your goals, this is a great time to be a buyer and a seller if you are working in the franchise automotive industry!
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 effective business broker has to wear a lot of hats ... they have to be a trusted advocate and place the client's interests upon all else, they have to be a financial wizard and understand the financials to develop a market-based pricing offer.
They have to be marketing experts and develop a campaign that gets the business in front of the right prospects. They need to be an effective merchandiser and develop a package of materials that conveys value in a compelling, relevant, and differentiated manner. They have to be the "deal quarterback" and call the plays they move the deal towards closing, including bringing in functional experts when needed. Above everything, they have to protect the confidentiality of the client, safeguard their interests, and help them derive the most return from their hard-earned investment in a swift, stress-free, and high integrity manner.
The question to the broker should be: How many hats can you wear?
How would you rate the current political environment related to small business growth, business acquisition & sale?
4/5
What are your thoughts on transaction terms for buyers & sellers in the current market?
Every deal, every buyer, and every seller is different. There is no such thing as an average deal. What I try to do is to pre-qualify all my listings such that there is a term sheet included in the prospectus package which spells out for the buyer an attractive, viable way to purchase the business via a bank loan.
I have found this practice makes a good listing, a great listing, and makes a great listing, a terrific listing!
Learn More On Deriving The Highest Return From The Sale of Your Dealership
Thoughts on business valuations in today's market?
Business valuations are a fundamental process step in the pricing of the business. Depending on the business category, the COVID situation can impact the valuation -- both positively or negatively.
I am finding that solid, established, and profitable businesses that possess strong brand equity, and motivated, talented teams are holding their multiples and business values in this environment.
