Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

February 10, 2019

The Worst Time To Sell A Privately Held Business

By Jeremy Albelda


“When is the best time for me to sell my company?’ – a question we have heard time and time again from business owners. “says Achim Neumann, President, A Neumann & Associates LLC, a New Jersey based Mergers & Acquisitions advisory and Business Brokerage firm, “And the question becomes even more important in the current economic cycle.”

After many years of excellent growth, business owners start questioning, if an economy supported by a favorable tax environment, low interest rates and significant available equity funding will continue to support growth in their companies, plus provide a good environment to sell their business in the near future – all of this with the background that most economic indicators continue to predict growth, albeit at a lower rate, with seemingly little support for an imminent recession.s

Furthermore, with many business owners approaching retirement within the demographic “baby boomer” shift, they are asking themselves this question more so with respect to lifestyle decisions than to financial concerns.

Setting aside lifestyle considerations for a minute, selling a company always starts with a proper initial company business valuation regardless of the economic cycle.   As we have seen so often on the television program, Shark Tank, a correctly valued investment opportunity will attract buyers, an overpriced proposition will result in little interest.

Such business valuations, conducted by accredited, national business valuation firms, usually view a seven-year financial period for formulating a value – three years of projections, the current year-to-date with comparison to the previous year and the past three years. Historic financial data is based on tax returns adjusted for discretionary owner expenses and one-time events in order to derive the true cash flow generating capabilities of the company. Said financial review is typically supported by a review of a company’s operation and market position.

Challenges come into play when there is little consistency in this seven-year review period, as investors always prefer to see stable environments and consistent trends.  Most often, there is the ’hockey stick’ scenario: a declining past trend of sales or EBITDA (Earnings before interest, taxes, depreciation, and amortization), is all of the sudden met with vastly optimistic projections for the future of the business’ performance.

How does the micro-economic effect of poor forecasting or the macro economic impact of the economy as a whole impact the opportunities to sell a company?

Focusing on the macro economic impact and the right timing of selling a company, let us assume a company has had consistent growth in the past five years in top and bottom line. Furthermore, assuming a 2019 economic decline, the company’s sales are predicted to decline by 15% to 25%.

For a contemplated valuation to be performed in 2019, such sales / EBITDA decline would land within in the previously mentioned valuation review period. The financials would show continued growth from 2016 to 2018, a decline in 2019, and reduced forecasts for 2020 to 2022. Thus, investors would immediately attempt to shift any perceived future risks to sellers, for example, in the form of a large earn-out for future performance.  In other words, such ‘dip’ has an immediate impact on buyer expectations for the future.

As we have seen quite often in the 2008 recession, some business owners might suggest to wait a year or two hoping for a rebound.

However, within the previously stated seven-year valuation review period, even if a business would only show a ‘dip’ in 2019 with continued growth there after, the historic cash flow 2018 to 2020 would still be ‘visible’ as a trend line in a 2021 valuation and thus, the business would not be ready for a business valuation before 2022 without showing any inconsistent trends.

Consequently, from a pure business valuation point of view, “waiting just one more year” truly translates into waiting three more years and, adding an additional year to actually sell a business, the business owner’s retirement plans were really delayed by 4 years – for a transaction in the spring of 2023. Needless to say, the underlying significant assumptions that there is no prolonged recession, the company will continue to perform without further ‘dips’ and there will be no health issues by ownership are strong assumptions, indeed!

In sum, any business owner contemplating a business sale at any time within the next three years, should not wait too long but rather take advantage of the current economic climate. A potential economic decline can quickly translate into a five-year delay for obtaining maximum value.

About A Neumann & Associates, LLC

A Neumann & Associates, LLC is a professional mergers & acquisitions and business brokerage firm having assisted business owners and buyers in the business valuation and business transfer process through its affiliations for the past 30 years. With an A+ Better Business Bureau rating, the company has senior trusted professionals with a deep knowledge based in multiple field offices along the East Coast and has performed hundreds of business valuations in its history. The firm’s competitive transaction fees are based on successfully completing transactions. For more information, please contact A Neumann & Associates at 732-872-6777 or

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“ I appreciate your diligent approach to screening buyers and sellers as well as the high quality CIM that you produce.”

Andrey O, Investor

“Finally enjoying retirement after recently selling my business using the services of A Neumann & Associates. Joe Oddo provided the conduit to a successful transaction. Joe knew when to inject input and when to simply listen and allow the buyers to vent, step back and regroup. The outcome met our expectations and got us to the finish line, which included my staying with the company six months in order for the buyers to get their footing and keep our workforce in the loop. He helped at every step by providing his expert guidance & resources. Thank you!”

Emily Parker Myers, Co-Owner - Myers McRae

“I had been in touch with Karin and Gary from A Neumann & Associates regarding some opportunities and was looking forward to meeting with them. Hence, when they organized a seminar in Princeton, NJ, I was quick to sign up. The seminar was very informative as the team walked the attendees through various scenarios and referenced real life buying/selling situations they had been through. The sessions by Gary, Karin and Achim were crisp and focused and brought clarity to potential seller and buyers. I strongly recommend the team and look forward to continue working with them.”

Gaurav Tyagi

“Thank you for your Event on "How to value, Sell, and Buy A Business for Maximum Profit" and the insight into ANA’s approach on what is involved in the Business Exit for sellers. Garys Hervieiou's "Business Valuation", Achim's "Deal structure" presentation and Karin’s "Preparing the Package" are real street knowledge shared. They answered attendees questions which makes it more interesting for learning from others. Great for small businesses like us. The presentations were totally worth our time and travel for the event to Princeton, NJ from Rockville MD. Ravi Bhutani, President, CIPS”

Ravi Bhutani

“Gary, this is to thank you for an excellent job done in selling our business. We could never have done it without your professional expertise, dedication and time put in without reservation to make it happen. We will gladly and highly recommend you to anybody in our position.  It was a pleasure to work with you.”

Pat Iammatteo, Owner

“Your vetting is simply outstanding, among the best I've seen from a broker.”

Eric H., Investor

“I recently contacted A. Neumann and Associates about getting a valuation of my business done. I spoke with Marc, who explained the process in detail. After meeting with Marc in order to get a clear understanding of my business, and what I was hoping to accomplish. His patience in answering all my questions and his knowledge of the proper way to market my business gave me great confidence that this is the firm I will be using to sell my business for max value. Working with Marc at A Neumann & Associates was very easy and professional. I did not know all that was going to be involved in selling my business but they helped me through the process. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. I highly recommend this firm to anybody who wants to sell now or down the road. Marc not only knows his stuff, but actually is a real nice guy.”

Double Diamond

“Used A Neumann & Associates to sale my business. could not imagine having done it with out the patience and experience Gary provided. Thanks Gary,”

Dennis Frazier

“Working with Marc and his company was a pleasure. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. Marc handled most of the interaction and he has one of the greatest demeanors. Again, it was a pleasure working with him and his firm.”

Douglas DiCeglio

“I recently completed an acquisition using A Neumann & Associates. Tony Valentino was very helpful and accessible during the entire process. They do a thorough job vetting both parties and got us to the finish line.”

Srini Mudambi
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If you are considering selling your business, please contact us to learn more about our comprehensive service spectrum. Our experienced professionals will answer all your questions about selling a privately held business in complete confidentiality. Please fill out our contact form, or call us at 732-872-6777. We will contact you directly and will never identify ourselves to your employees.

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