Due to the recent stock market volatility, I have been hearing the familiar phrase “selling pressure”. I am not anywhere near an expert on the stock market but I do know something about selling pressure as it relates to businesses.
Our firm’s research shows that Baby Boomers will put an average of 378,000 companies a year on the market through 2029. According to Capital I.Q., an average of 7,925 privately held businesses were acquired or merged during the years 2007-2012. Let those numbers sink in, 378,000 per year average vs. 7,925 per year average. Talk about selling pressure! The evidence for this increase in selling continues to mount. According to a recent New York Times article, “The number of small businesses listed for sale nationwide is at a six-year high, according to data compiled by BizBuySell.com, an online marketplace. The tally of completed transactions is also rising, and the median sale price is up 12 percent compared with prices a year ago(Cowley, August 19th, 2015)”.
This increase in the number of baby boomer companies for sale is turning the market into a buyer’s market. The type of selling pressure that business owners are facing is the pressure to be competitive and realize the full value of a business they have spent a life time building.
How can boomers prepare for this buyer’s market? As a start, I strongly suggest the following:
- Develop an exit transition plan as soon as possible. According to a Hartford Business.com article by Brad Kane, “The BlumShapiro report “Succession Reset: Family Business Succession in the 21st Century” found that 80 percent of family-owned businesses globally haven’t adequately prepared for an upcoming transition(Kane, August 17th, 2015).”
- Assemble a success team. This should be in key areas that impact the timing and preparation of the eventual sale. We outline these areas in our book, The Exit Strategy Handbook.
- Determine the gap between the current value and the desired sales value of your company. The desired sales value gives you a goal to work toward and provides a gauge on the amount of work that needs to be completed and a timeframe.
If you are looking to sell during the next several years, make the selling pressure work for you with a plan, a team, and a goal.
*Cowley, Stacy, (August 19th, 2015), New York Times
*Kane, Brad, (August 17th, 2015), Hartford Business.com