Over 88% of business owners think their business will stay in the family. In fact, only about 30% of family-owned businesses survive into the second generation, 12% are still viable into the third generation, and only about 3% of all family businesses operate into the fourth generation or beyond. As baby boomers are heading for retirement, who is going to take over the businesses the boomers are looking to sell?
Today’s business owners are faced with multiple factors when deciding the right time to sell. The perfect time can be tricky to predict as several economic considerations need to be weighed. The majority of business owners begin this thought process when nearing retirement age, but is this too late? The most important considerations are current economic statistics, market conditions, and industry trends. These are good predictors of a sellers’ market and shows the types of buyers and private equity companies ready to invest. Buyers are looking for businesses in the growth and maturity stages of their business life cycles. During these stages, operational bottlenecks are becoming managed and demand, profits and lasting customer relationships have been built. Business owners sometimes have the tendency to postpone selling until operations and profits begin to decline. This is a costly mistake for any business owner wanting to maximize their company’s value.
Sellers should strive to put aside personal feelings anchoring their decision-making process when considering their exit strategy. When considering selling, business owners should focus their attention on asking is my business in a financial incline, is my staff in place able to succeed without me, do I have a diversified client structure, and are my capital expenditures under control?Business owners need to consider these objectives now and determine if a sale is the right decision. Economic environments quickly change and in order to achieve a premium sales price, a favorable market is the key. Currently, multiples are at a historic high with limited quality businesses available for sale. Baby boomers are holding on to their businesses and aren’t willing to sell until they have to.
This can be a hard-personal decision to make for owners who have built their companies from infancy. Owners are conflicted with their decision, asking did I do the right thing, did I maximize my company’s value, will my employees be taken care of, and what is next in my life.Before considering the sale of your business, define both the internal and external factors and remove any hidden traps that cloud your decision-making process and can result in missed opportunities. By having a written exit plan, an experienced team of advisors, and patience, business owners will realize the full value of their life’s work.
Here at Benchmark International, we understand the emotional and physical stress that accompanies the decision to sell. Our experienced advisors assist by providing an outside perspective to business owners and by identifying suitable conditions in the M&A sector. Our responsibility is to ensure our clients are presented with all the facts and strategies to move forward. Benchmark International values close relationships and ensures that our clients are fully prepared to make the right decision when the day comes.
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