Transition of Ownership of Small and Medium Sized Privately Owned Businesses. What is happening?
By Greg Kells, President of Sunbelt Business Brokers
The top 10 factors influencing this:
- Covid has affected small businesses with many having the busiest years they have ever seen while others are barely surviving. The busy ones a struggling to keep up with delivery. Some are struggling to pay their bills.
- We have an ageing population of business owners. Ten years ago, a massive number of transitions was predicted. It is beginning now.
- Technology and market changes are forcing changes in marketing and operations for many businesses
- Interest rates are low, and financing is available to purchase small businesses
- Covid has prompted many people to reconsider what they want from life resulting in an increase in the number of purchasers seeking to buy small businesses.
- Real estate values have increased dramatically making home equity loans available to potential purchasers
- Difficulty in supply chains, recruiting, and retaining staff is making business ownership more challenging
- Growing immigration of entrepreneurial people is increasing demand for small businesses.
- Govt. programs have propped up many businesses allowing them to survive however these programs will end soon so business owners are taking action to address life after CERB, CEBA, CERS, etc.
- Well trained professional Business Brokers are doing a much better job of providing options and help for Business Owners and potential purchasers.
It is the Best of Times for some, and it is the Worst of Times for others. We are seeing a significant increase in the number of Business Owners wanting to retire. For the owners whose business is booming it is becoming more work than they want, and the market and technology changes are further increasing demands on them. Their business is prospering, and they think it is a good time to sell – They are right. For the business owners who are struggling and worried about survival, they are looking at a few years of hard work to get back to where they were, and they do not want to do it – they want out. Keep in mind most of these business owners are getting on in years. They do not have the energy they had 10 years ago. Businesses only coast one direction.
At the same time there is an increasing number of competent buyers with access to funds to purchase a business.
I have trained most of the Business Brokers in Canada and have participated in the evolution of our profession. Standards have improved, training has improved, technology has improved, marketing has improved and importantly the skills in analysis and packaging have improved, resulting in a much-increased close ratio (we sell almost all businesses we take as clients), higher values for the sellers (a good broker adds around 30% to the value of the business), better structuring of transactions, and a much higher success rate for purchasers (over 98%). Business Brokers are doing a better job resulting in win/win transactions. They arrange financing for the purchasers on terms that work for success, and they overcome the vast number of hurdles that kill deals.
To sum up, it is currently a sellers’ market and a great time to sell however we are expecting this to shift over the next couple of years to become a buyers’ market as an increasing number of Business Owners decide to exit. If you are thinking of selling your business, now is a great time to act and that action should begin with meeting the best Business Brokerage you can find in your city.