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Tuesday, March 17, 2015

Baby Boomers Are Keeping Business Brokers Busy

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Financial forecasters say that the US’ 70,000,000 Baby Boomers are all set to make waves in the American economy. With a great number of this demographic owning businesses and planning to retire, some predict a 'tsunami' of Baby Boomer enterprises will hit the business sales market – though fewer are disposed to offer predictions about the likely consequences.

The numbers alone are impressive: $10 trillion worth of assets are poised for sale or inheritance in the next 20 years, and it's estimated over 70% of these will be sold to third parties; and, during the next 10-15 years, nearly 12 million independent businesses will be put on the market.

Within the Baby Boomer category, those between 45 and 64 set up businesses at a faster rate than other age clusters, and those aged 55 to 64 establish businesses fastest of all.

Whatever the implications for the economy and the marketplace, business brokers had better brace themselves for action because
business valuations will be required, and market advice will be sought.

And in a climate where market conditions are likely to be heavily influenced by this new demographic context, all concerned will need to reflect carefully on what they hope to achieve, and consider what strategies are most likely to secure the goals they are planning.

One view holds that, after the economic trials of recent years, many – including Baby Boomers – now feel owning a small business offers better security than working for a huge corporation. In that scenario, Baby Boomers will be well represented on both the buying and selling side of the market, creating a certain sustainable market symmetry which will remain relatively unaffected by the usual market fluctuations.

If that assessment holds true, then this is the time for brokers to be making contact with prospective clients. The sooner the pricing/valuation phase is under way, the sooner brokers can proactively seek out buyers.

With buyers, the critical information to note will be their 'ideal deal' – regardless of whether your agency currently lists anything in that category. Brokers can then 'sell' current business listings which match buyer requirements, and 'bank' buyer interests which cannot presently be met, re-contacting those prospective buyers who were banked as suitable listings subsequently materialise.

The Florida market in particular has become very buoyant and around 75% of these prospective Florida sellers are Baby Boomers, some wishing to sell outright and others sometimes looking to dispose of part of their holding in a partnership-style arrangement intended to spread the risk and lighten the load.

However, some see the en-masse retirement of Baby Boomers in terms of a potential crisis with a glut of saleable businesses flooding the market, creating an asset bubble.

In their 'Beat the Exit Bubble' book, corporate developers Homan and Meyer advise owners to behave like purchasers rather than sellers. This, they claim, is the only realistic way to assess the true value of a business. This more cynical evaluation is supported by a recent PricewaterhouseCoopers report suggesting 4/10 business owners anticipate closing down altogether at retirement, and yet another evaluation claiming 8/10 of all listed businesses are destined to remain unsold.

Despite the gloomy outlook projected by the above figures, demographics may actually hold the key. There are currently 80 million US Millennials below the age of 34, many of whom are bound to harbour entrepreneurial ambitions. They represent the next generation of potential business owners, though once again, sellers must be prepared to adopt the mind-set of their potential buyer market.

Those Baby Boomers prepared to think like a Millennial and refocus their marketing approach, and maybe even some aspects of their business operation, to appeal to these buyers are the sellers most likely to achieve the outcome they seek.
 

This article was contributed by BusinessesForSale.com, the market-leading directory of business opportunities from online media group Dynamis.

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