Who Will Buy a Baby Boomer’s Business ?
As the Baby Boomer generation moves into their retirement years we are seeing the supply of small businesses for sale far exceeding the demand ( potential buyers )…………..an imbalance between supply and demand that will last for the next 10 to 15 years.
THE “ BUSINESS SALE ISSUE “ IN OVERVIEW
Many small business owners will have given little thought to planning the sale of their business during the years leading up to their decision to retire (often they’ve been just too busy with the day to day running of the business ). This lack of planning puts them in a relatively weak position when they put their business on the market for sale.
When a small business owner finally decides that the time has come to retire a common decision is to list the business for sale with a “ Business Sales Broker “ in the expectation that one or more good quality buyers will soon line up at the door. Sadly that very rarely happens. Indeed, it is quite common for a business to be listed with a broker and on the market for over two years and still not have a serious buyer in sight.
Of course, the reality is that even if a good potential buyer turned up tomorrow the seller will probably still be a year away from the day he/she can commence on enjoying a well earned retirement ( say 6 months to negotiate the deal and go through the due diligence process PLUS say another 6 months for a hand over period ).
As stated above…….it is quite common for a business to be on the market for over two years and still not have a buyer in sight ( a sort of “ limbo “ period ). The longer this “ limbo ” period continues the harder it becomes for the business owner to remain fully motived to run the business with the same energy and drive as he/she had in years gone by. Of course advancing age and health issues of the seller can be additional issues contributing to turnover and profits moving on a downward spiral as time goes by.
Of course if the key financial numbers in the business are on a downward trajectory it then becomes even harder to find a buyer for the business.
This is the reality that many “ over sixty “ business owners now find themselves in.
THE INEXPERIENCED BUYER
As stated above…….. we are seeing the supply of small businesses for sale far exceeding the number of good quality buyers of small independent businesses.
This problem is exacerbated by the fact that inexperienced buyers are finding it extremely difficult to raise anywhere near 100% of the “ sale price “ ( banks tend to very cautious when asked to lend substantial sums of money to loan applicants who are inexperienced in business ). Equally, sellers are often unenthusiastic about agreeing a sale on “ payment over time “ terms to an inexperienced buyer. The seller will, understandably, lack confidence in an inexperienced purchaser’s ability to run the business professionally and profitably in the years ahead.
Accordingly “ inexperienced purchasers “ are very unlikely to be able to close a deal with the seller.
So we are left with only “ experienced/good quality buyers who are extremely thin on the ground……………..the reality is it is very much a buyer’s market and will remain so for years to come.
The harsh reality is that there are nowhere near enough “ experienced/good quality purchasers so there is a substantial risk that many retiring business owners will not find a buyer at all.
IS THERE A SOLUTION ?
The foregoing summarises my own personal opinions of what I am seeing in the small business sector. The views that I’ve expressed above are arrived at mostly from speaking to baby boomer business owners and experienced business people closely connected with this sector. I personally know of a number of very well established and profitable businesses who are finding it very difficult to find a buyer for their retirement sale ( some even making profits in excess of £250,00 p.a. ).
If a small business owner is finding it difficult to find a buyer then I suggest :-
*That the time has come to seek a more imaginative solution.
*That the time has come to act fast to preserve as much as possible of the business value.
If your business is making at least £50,000 net profit before tax. If you are open minded and have a “ can do “ attitude then I may be able to help you achieve an “ exit solution “.
I’ll be happy to hear from you if you’d like to discuss your particular circumstances.
Until the next time.
Jim