Inc.com recently published an article that I found fascinating because it outlined the reasons why now is a great time to buy a business. I thought I would share some key points from it because it points out why this is a prime time for any of you planning to exit in the next 12-24 months to likewise find a motivated buyer.
So why is NOW a good time to buy a company?
According to Inc.com, business owners need to be aware of three key buyer motivations so you can use them to your advantage as a seller:
The first reason is very clear: the sheer number of baby boomer business owners that will be retiring and selling their companies in the next 10-15 years is stunning. And the pace will only accelerate as even more decide to cash out because the pandemic has taught them that no matter how prepared your business is, stuff happens that is beyond your control.
As we have examined before, about 60 percent of the 15 million privately held businesses in the U.S. are owned by business owners born before 1964.
If you are a baby boomer business owner, let that statistic sink in for a moment.
60 percent of 15 million is 9 million. Eventually, all 9 million businesses will need to transition to new ownership as their baby boomer owners retire and move on. For the sake of our discussion, let’s assume that 50% of these 9 million either close the business, sell to their employees, or pass the company on to their children.
That leaves a staggering 4.5 million that will need to transition to new owners via an M&A event over the next 15 years or so. Again, keeping the math easy, that is roughly 300,000 that will need to find buyers per year.
And this data was from pre-pandemic research. It is clear that many, many baby boomer business owners will move their retirement plans up now.
So, where you want to be in this timetable? As close to the front as possible before the supply is greater than the demand. Dust off your exit plans now because post-pandemic, there will be a buyer boom (see reason three above).
Sociologists and economists are both predicting that once the pandemic ends, and a significant portion of the population is vaccinated, we may experience an economic resurgence not seen since the roaring ‘20s. There is simply so much pent-up demand, so many folks that have been idled on the sideline, that the economy will boom, making it a great time to exit your company for an optimal value.
And finally, as we see in Inc’s second point above, the really good news is that there is ample financing available for buyers to make acquisitions. This recession we are moving out of is not like the Great Recession of 2008-2009, which was driven by a financial crisis. This recent recession was caused by a near-total shutdown of our economy due to a health emergency. Financing was ample before and, thanks to multiple Federal government programs, will be even more readily available going forward.
Just one example: The Consolidated Appropriations Act, passed in December, authorized the Small Business Administration to make key changes to its 7(a) and 504 loan programs, which may make it easier to acquire a business, says Lynn Ozer, president of MultiFunding, an Ambler, Pennsylvania-based advisory firm.
In addition, private equity is sitting on $1.7 trillion in dry powder which all needs to be invested soon for their limited partners.
The time to act is now.
The longer you wait to move forward on your exit journey, the greater the risk that you will be exiting at the end of the baby boomer retirement wave. Let the admonishing from Inc.com apply to you as well:
So, if you're interested in buying, it's best to get your documents in order now.
And the same is true if you are looking to sell and exit – get your documents (and motivation) in order NOW!
If you find the entire idea of exiting your business daunting, worrisome, exhausting, and depressing, the good news is that Generational is here to help. We can guide you from beginning to the end and even through the post-close process via our professional teams:
If you want to find out how we can help you take advantage of an expanding buyer’s market reach out to us here:
Carl Doerksen is the Director of Corporate Development at Generational Equity.
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The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.Andy Graham, Vice President, Modern Heating & Plumbing
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I am pleased that I was able to work with Andrew Byrd throughout this experience. From the first meeting we had in Minneapolis I felt that I was in good hands. His knowledge and expertise is second to none. He guided the process consistently throughout. I feel lucky that I was pared with Andrew and could not be happier that I chose Generational Equity to handle this major life event. Thank you Andrew and GenEq for everything!Eric Erlandson, Owner, Action Fastenings, Inc.
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.Pete L.
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Thanks again Phil and feel free to have a future client call me if they would like a referral. You are a true professional!Andy Graham, Vice President, Modern Heating & Plumbing
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.Robert Evans, President and CEO of Mealtracker Dietary Software
T.D., thank you so much! You are a great leader! I love how you are using your gifts and talents to better others. You are clearly a GREAT COACH! This 3 day session undoubtedly changed the future of our business, and very well may have been the sole catalyst to save my company, my health and my marriage! A genuine “thank you” from the bottom of my heart.Bryan D. Horn, Owner, Over Under Clothing
We are extremely pleased with the way Generational Equity handled the sale of our company. Your associates, Tom and Chris, did an outstanding job of getting us (me) through the process.Michael J Polarek, President, Paragon Packaging
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Tom Staszak is one of the most professional people I have dealt with in my last forty years of business. You’ve got a great group of people and you have built a truly professional organization.Michael J Polarek, President, Paragon Packaging
We will highly recommend Generational Equity and Musa Jagne to any business owner about to embark on the same process.Karen S. Williams, CFO, BW Manufacturing
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.Terry D. Wickman, President, Keytroller
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.Robert Evans, President and CEO of Mealtracker Dietary Software
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.Jay Dinnison, Owner of Sharpe Mixers
I need to say an immense thank you to Don Ho for his stellar work ethic, attention to detail, and tireless effort. Also thank you to the whole crew at GE! Without you, Don could not do such a phenomenal job. We were shooting for closing and funding before the end of 2020, due to the uncertainty of the political landscape and taxes. I am happy to report we closed last week and will be funding tomorrow.Dr. Caty J. Catron PhD, RN, VA-BC – Owner, Vic The Picc, LLC
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
Dear Chris and Andre, I just wanted to say thanks for all your help. Even though this process was not an easy one, it was comforting to know that I had a capable team standing beside me. You made me feel like we were almost your only client or at least the most important one. Thanks again, and I will recommend your service in the future.Shenille Engelhart, Owner – CLS Technology
Bruce and I wanted to take this opportunity to thank Generational Equity for assigning Musa Jagne to our transaction. In Bruce’s words, “Musa did one hell of a job for us!”Karen S. Williams, CFO, BW Manufacturing
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Terry D. Wickman, President, Keytroller
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.Jay Dinnison, Owner of Sharpe Mixers
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.Larry Moore, Owner, A Company Portable Restrooms
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