As the financial recovery from the pandemic continues, we are finding that Main Street (enterprise value of $250K – $5M) business acquisitions are up more than 32% from 2021 to 2022. This rebound is great news for buyers, but to fully understand the uptick, let’s drill down into who is currently looking to sell their businesses and which demographics are primed to make a purchase.
Who’s selling
As many may expect, the primary sellers are baby boomers. Born between 1946 and 1964, the later end of this demographic is approaching retirement and looking to plan for their third act. The last of the boomers will reach full retirement age in 2031, just 8 years down the road. Additionally, recession concerns, labor shortages and general burnout are propelling some to consider selling their businesses sooner rather than later.
However, not all boomers are ready to cash out and leave the workforce. In fact, 49% of baby boomers expect to, or already have, extended their working lives past 70 or do not plan to retire, according to the nonprofit Transamerica Center for Retirement Studies in collaboration with the Transamerica Institute.
Finally, the other top category of sellers is those interested in capitalizing on the buoyant business sales market we are currently experiencing. These sellers may be looking to step back from entrepreneurship or simply feel it’s the right time to shift their focus to a new and different business.
Who’s buying
If the sellers are boomers and those looking to cash in on the hot sales market, who are the individuals buying at the moment? The two main groups are people looking to leave corporate America and be their own boss and strategic buyers.
The pandemic changed how many people looked at work/life balance. The first group of people buying took a hard look at how their jobs were aligning with their personal lives during the lockdown and came away thinking there had to be a better way. They are interested in entrepreneurship so they can make the rules and decide when they need to clock in and out.
As a result, this group is looking for businesses that are considered the most recession-proof. Among that group, service-based opportunities are the most popular. By exploring their dreams of entrepreneurship, these individuals gain more independence and control over their work/life balance.
That leaves strategic buyers, e.g., people interested in acquiring a business for strategic reasons. They have most likely never owned the type of business they are purchasing and are interested in the business to enhance their competitive position. For instance, this type of buyer may be looking to gain complementary products, technologies, customer bases or distribution channels that will help them with cost savings, revenue growth, market expansion or other strategic objectives.
Strategic buyers can be larger companies looking to buy a smaller business to expand their offerings or consolidate their industry position. They could be buying a company to enter a new market or eliminating a competitor. The focus for them is on the long-term benefits the business gives them, not financial returns alone.
Even with some economic conditions changing in 2023—interest rate increase and concerns about inflation—the data on sales speed, price and deal volume continue to trend upwards, as they did in 2022. These are all good signs for anyone looking to sell their quality business in the months ahead.
Please feel free to reach out to learn more about how we can best position your business for the most profitable exit strategy even if you think you are years away from your actual exit. It’s my job to help you figure out what your business is worth now and help you guide it to where you need it to be for the perfect ending to this chapter of your life.
