No one can argue that the impending baby boomers retirement will affect how business markets operate currently. And it will be no different for mergers and acquisitions and small business sales. In the current market, it is estimated that approximately 30,000 - 50,000 business sales occur every year. With the wave of baby boomers planning to exit their businesses, however, SME Research predicts that up to two million businesses will be sold between 2017 and 2020. This would increase the market volume ten-fold, to an average of 500,000 businesses each year.
What does this mean for sellers?
Right now we are experiencing a seller's market. There are many more qualified buyers searching for good business opportunities than good businesses available for sale. Over the next three years that will slowly start to flip, until we have a strong buyer's market where many business owners will be competing for deal dollars. From a basic economic standpoint, this means two things for business owners planning on selling in that market: 1. Sale prices will go down 2. Competition will increase and it will be harder to sell your business.
What does this mean for buyers?
If you are in a position to buy a business or add-on an acquisition?opportunity to your current operations, this time could be incredible for you. Buyers may be able to expand their business operations and overall value during this time through savvy acquisitions.
So what should I do?
If you own a business and you are thinking about selling your business in the next three to five years, don't wait. Yes, it is true that you can price any company right and it will sell, in any market condition. However, if you want to avoid the unknowns of the potential decreases in valuation sell your business on the market now. Just because you sell your business, does not mean you have to exit your business. You can construct employment or contract agreements that keep you involved and working for years after the sale. At the very least have a conversation with a professional advisor like a small business broker, business attorney, or financial planner and begin planning today.
The Seller Tsunami is not something to fear, but simply something to plan for. The baby boomer generation will affect business sales. If you are worried about how the baby boomer generation will change your business value, start planning your exit now.?
Transworld Business Advisors of Denver is a team of Denver business brokers that helps visionary entrepreneurs buy a business, sell a business, or grow a business through franchising. If you are interested in having a conversation about what your business is worth, or how to sell your business you can contact us via email or phone at 720-259-5099.
