People often ask me if I am seeing a larger number of business sellers during the difficult economic climate for the green industry we are experiencing this year.

Many people expected there to be a flood of business sellers as a result of a variety of factors, including:

  • Last year’s run-up in fuel prices,
  • A corresponding increase in commodity prices
  • A challenging labor force in light of attitudes toward immigration and a reduction in the number of workers available under the H1B guest worker program,
  • Issues relating to the ability of  businesses to  obtain financing as  a result of the credit crisis, and
  • The impact of the disastrous fall-off in the construction industry leading to dramatic revenue declines for many landscape companies.

Many stronger companies stand ready to make acquisitions ion this environment, hoping to protect and expand their existing businesses by taking advantage of businesses for sale.

Surprisingly, there does not seem to be a flood of businesses on the market.

I often tell people contemplating acquisitions that the reasons that businesses are sold are frequently not directly related to the economy.  They are often on the market due to “life events” such as death, disability, divorce, illness, a change in a spouse’s employment, etc.  These situations are not conducive to delaying the process.  Other reasons that owners choose to sell include retirement and “just being tired.”  Those reasons are conducive to delaying until times improve.

One important consideration is that most small business owners are business owners because they want to be.  They value the independence and little perks that come from being a business owner.  It is often “in their blood” and something they do not give up quickly.

If an owner is considering selling his or her business, they have to consider what is next for them.  In the current environment, they have first to consider what the after-tax proceeds from selling their business will be and what they will be able to with the funds after the sale.  A $1 million purchase price may sound like a lot of money unless it turns into $600,000 or so after tax, depending on the seller’s tax situation.  Then, if they are able to invest the proceeds to produce a 6% yield, they will have a whopping $36,000 per year to work with.  And that is if they really can get a 6% yield.  Not quite enough to move to the beach.  On top of that the employment market continues to look pretty gloomy, so unless a seller has a clear idea of what they are going to do next, the idea of selling may look a lot scarier than toughing it out during a couple of down years for the business.

All that being said, I really do believe that many small business owners would do well to at least consider selling their business – but only if there is a clear strategy for what’s next.  A strategy that combines the business with a larger, stronger one that offers economies of scale and  post-deal employment can make a lot of sense.  That kind of transaction can leave a business owner with both greater security and a career.  In fact, in some cases, the selling business owner can wind up with greater job responsibilities ad earnings potential after the sale.  Even then, it is a big decision to decide to sell your business.

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One Response to Where are the sellers?

  1. Mark says:

    I’m a seller!
    Our client is a privately held decorative accessory manufacturer and distributor, one that presently finds itself in a unique situation. The decorative marketplace has been turned upside down by the recent economy and many of the weaker players did not survive. Our client’s competitive advantage in this climate is that they are smaller and nimble as well as being green via its eco-friendly product.

    We are looking to speak with individuals who have extensive sales and strategy experience in the home décor, import and/or retail industries. You will be challenged to revive sales to levels which were recently over $1M and assume leadership and ownership in the organization in time. The facility in its current state can run at a capacity of $3M. This is truly an opportunity to invest sweat equity in a company as you help craft its organic growth.

    The company is located in the upper Midwest but does business globally. They really need an innovative businessperson who loves wearing their sales hat. There are many sales channels this company has yet to tap into – large retail accounts, internet sales, B2B distributor sales, etc… That is your job, to build the revenue of the company and assume ownership. The company has a healthy line of credit, owes no debt on equipment, leases or to vendors – it’s a healthy cash flow business. You may be required to commit capital to an entrepreneurial venture of this nature.

    For immediate consideration, please contact Mark Gragg, Director of Recruitment of the Greenman Alliance. Mark can be reached at 214.385.4115 or by email at mark@greenmanalliance.com.

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