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In the next 10-15 years, over about 12 million businesses will be sold with that projection to increase over time. Business owners can agree on the one fact that the purpose of selling their business is the access the full value of its appraisal. Why? For retirement. As baby boomers begin to sell off their businesses, understanding the specific strategies they need to take become vital.

Unfortunately, several business owners won’t be able or ready to sell because they haven’t taken the necessary transition steps or are fully prepared to reap the full value of their enterprise. Planning an exit, also known as succession planning, is key to reaping the rewards.

Statistically, many business owners have little to no exit planning in place, despite that 80-90 % of their assets are in the business itself. Planning ahead for selling will give business boomers the best transaction results possible.

According to various sources, approximately two-thirds of business owners are less than ready to sell within the next 10-15 years, despite this being a huge time for selling with wide profit margins. It’s estimated that around 5 million firms that hold over 10 trillion in assets will change hands of ownership over the next decade or so. Only 20 to 30 percent of those businesses that end up on the market will sell. That’s only a quarter of businesses that will actually make a profit. The rest will flounder with a lack of preparation.  A recent national report noted that only a quarter of small business sales closed a deal in 2016 alone.

Private equity companies and strategic buyers are looking to buy great deals but are having trouble finding them. There are slim pickings amongst an unattractive supply. While the demand is strong in this seller’s market, the supply just isn’t making the cut.

Baby boomers (approximately ages 53-71) are grasping onto the value of their businesses for dear life, much longer than previous generations. Baby boomers aren’t keen to leave their businesses because they’ve been accustomed to the cash flow, so they’re not going to sell or transition unless they need the money or a crisis unveils itself. They’re expected to sell in their early 70s, despite a boom in selling years ago.

Several business owners are waiting too late to plan for a sale or liquidation of their enterprise. In a recent survey of San Diego’s business owners, many people are facing obstacles in pricing their businesses to get a good profit and also to appease the buyer.

If a business owner hasn’t appraised the value of the business or looked into its true value, consistent with inflation and recent economic charts, then business owners will either highly overestimate their value, shunning buyers, or highly underestimate their value, losing potential money. A business owner may be valuing the business based on forecasted projections of revenue or a guess on order count, but true business owners will look at monthly and annual cash flow to see how the business is generating real profit.

To plan for selling, seek professional help from accountants and advisors to get a real estimate of the business value. Tax returns are not sufficient here. Get educated and ask for expert advice.

About the Author(s)

Todd Michael Cohan

It's time in my life that I gave back to the entrepreneurial community. A lifelong entrepreneur with many successes (and failures), I can advise and consult aspiring entrepreneurs form and improve business ideas.

The Current Rise in Small Businesses Being Sold Over the Next 10-15 Years