A new generation of eager, young entrepreneurs are looking to plant their flags in the market, and thanks to an approaching transfer of business ownership, business will be booming. As baby boomers retire, they are looking to sell their businesses to establish a livable nest egg, but what does this mean for buyer prospects?
According to a California Association of Business Brokers report, baby boomers are set to sell almost 12 million businesses in the next decade. This means over $10 trillion in assets will change hands to young professionals in the next couple of years. This handoff is already underway and is fanning the flames of a newly hot business-for-sale market.
Don't overlook existing businesses as an entrepreneurial starting point
The Silicon Valley rags-to-riches narratives make for good Hollywood storylines, but this model isn't the only way to enter business ownership. With so many business owners on the brink of retirement, and with a huge surge of sales forthcoming, buyers should take note that the market scale is about to tip drastically in their favor. In fact, acquiring an existing business comes with many perks for young entrepreneurs looking to get their start. Some of these perks include the following:
- Minimal upfront costs. You're not just purchasing the business. You also buy the brand, customer-base, management policies and other invaluable existing factors.
- Low risk. Any business worth buying has likely proven it provides a healthy return on investment. With most of the necessary business foundations in place, there will be very little groundwork to be done.
- Established cash flow. An existing business will probably already have steady cash flow, which eliminates the scramble of starting from scratch. It's likely there will already be equipment and employees available, so there will be no lapse in revenue when jumping in.
With these perks in mind, buying an existing business makes perfect financial and practical sense for new entrepreneurs. Thanks to an approaching flood of baby boomer business sales, there are more than enough opportunities. So how can young professionals tap into this market surplus and find a viable business opportunity?
How to find a business to buy
Finding a business for sale is not always easy. Owners close to retirement and looking to sell are usually tactful about their intentions in order avoid unnecessary hysteria among employees and customers.
Staying in the loop is one of the best ways prospective buyers are tipped off about acquisition opportunities. With a staggering 12 million businesses set to change hands from boomers to Gen Xers and millennials in the next decade, buyers are bound to get a whiff of a sale through their professional network.
Local and industry publications can be a good barometer for the state of the market, so brush up when you can. Practicing regular, proactive measures in researching and networking are a great first step toward finding a deal. Those that do their homework and foster professional connections will have a good sense of which sectors are worth investigating and how to get a foothold in acquisition conversations.
Another valuable method for discovering available businesses for sale is through online business listing sites. These marketplaces are specifically designed to connect buyers and sellers. Shopping online is an easy and effective way to seek out deals and begin negotiations. These online resources cut the need for third-party mediation and get to the heart of the issue: connecting buyers and sellers.
Sometimes spurring a sale starts with, despite how simple it sounds, merely asking. Whether inquiring personally or through a broker, the impetus for buying a business can start with a simple conversation with the owner. Keep in mind, brokers generally take a 5 percent to 10 percent commission, but their expertise can add a lot of value to the buying process – especially for first-timers.
It is an exciting time for entrepreneurs savvy enough to recognize the eminent buyer opportunity on the horizon. Baby boomers want to sell, and entrepreneurs are looking to buy. The first step for cashing in on this sea change is recognizing the value of buying an existing business and knowing where to look. Otherwise, this yin/yang relationship will undoubtedly translate to huge acquisitions for buyers in the coming years.