However, business prices like prices for any other asset are only a function of supply and demand at a given time. Factors that influence prices must influence supply, demand or both of them at the same time. When most sellers are waiting, prices tend to jump instantly because of a lack of supply. Demand also increases as investor sentiment improves. Spikes in prices tend to happen way before most sellers expect it. When sellers realize that prices have increased, they all tend to jump in the market instantly, driving prices down again. This is exactly what happened to the Canadian real estate market between May 2009 and April 2010. Prices increased dramatically at the very early stages of recovery and started declining as the recovery was confirmed. The business for sale market tends to follow a very similar pattern.

There are so many other reasons why business sellers who are ready to sell their businesses should act now and not wait for the market to improve. These are some of these reasons:

• The massive retirement of baby boomers who own businesses might increase the supply of businesses and decrease prices.
• The expected shortage of labor in the work marketplace might reduce potential buyers looking for job replacement, reducing demand and driving prices down.
• Sellers waiting for prices to increase might lose interest in their business, driving down performance and therefore business value, which could not be compensated by a price increase.
• Sellers with health issues might run short of energy and time to transfer the business to the buyer driving their business value to practically to zero.
• Business is like a perishable good, it could lose a lot of its value if its owner’s drive is not there anymore.
• Another recession might hit before the sellers even realizes it, which could make the sale of the business almost impossible.

There are so many other reasons why owners who are ready should sell and not wait for a wishful and unrealistic increase in prices. Aside from extremely unfavorable market conditions, the sale of a company should be made when the seller is ready not when the market is perceived to have peaked. Trying to time the market to sell for the best possible price is rarely a good idea when selling a business.

It’s obvious that in a booming economy buyers for medium sized and large businesses are more enthusiastic about business purchase and perceive a low risk in business transactions. The demand increases as a result an so do business values. This is not so obvious for smaller size businesses for the following reasons:

1. Small business valuations are already on the lower end of the valuation spectrum because of their high dependence on their owners. Business buyers are always afraid that the business is the owner and no value will be left when the seller leaves. Therefore, even in a slow economy these valuations still look attractive to buyers.
2. Small businesses are more like a job replacement than an investment. New owners have to be very involved in the daily activity of the business and as a result they have more control over the business destiny and they perceive a lower risk in purchasing the business.
3. In a slow economy laid-off workers looking for a job replacement find business purchase a very good alternative, which increases demand for small businesses and put an upward pressure on prices that balances the negative effect of the general business pessimism.

Moreover, a businesses seller that is ready to sell but deliberately waits for the economy to improve might be making a poor business and life decision. Small business success is largely a function of the owner’s enthusiasm and hard work. If the owner looses interest in the business, the business generally deteriorates very quickly and loses most of its value. This loss is in most cases much bigger that the potential increase in value that could happen if the economy turns around.

Additionally, even if the economy turns around, which might take a few more years, the business sellers will still needs to wait some additional years to repair the business financial statements so they look attractive to buyers. It could be five additional years or more before the seller could consider selling again.

If the seller has a good reason to sell, then waiting five additional years is in most cases not a viable alternative. After all a seller desiring a complete change in his/her lifestyle should be the one deciding when to do it not external events such as economic conditions!