I have seen the same trend and it happened almost overnight! I noticed a 75% reduction in businesses for sale during October, as if someone had turned off the tap. Clients suddenly changed their minds not just because of the difficulty in securing finance but also the concern about ongoing cash flow of the businesses they were looking at purchasing.
I agree that a relaxing of the “credit squeeze” will help the baby boomers, but in the meantime until the buyers come back into the market, business owners need to look at preserving the value of their business – ready for the right offer.
Preserving or improving cashflow in the current difficult times can have a double impact – boost the cash balance of the existing owners but also make “vendor terms” more attractive for those having difficulty getting finance. They key is making sure the business has systems for communicating the cashflow on a regular basis.
The unfortunate news is that many of my clients don’t have the necessary reporting systems in place. I recently surveyed business owners and found the majority with turnover of less than $5 million a year had any sort of return on investment or produce regular cashflow reports.
While an easing of the credit crisis will help many business owners, I fear an even larger number of them are simply not ready to sell their business in tough times. For these business owners it will be a rocky road ahead.
I would love to hear comments and experiences from other business owners([email protected]).