05 May Businesses Startup Rate at 15-Year High
Last year 565,000 new businesses were started every month. That’s 6,780,000 or over 6 and a half million for the year. Another way of looking at it is that every month in 2010, 340 of every 100,000 adults launched a business. And, apparently the numbers were about the same in 2009. Now, obviously the businesses launched weren’t all General Electric or Ford Motor Company. In fact, very few even had one employee. And, we all know that many of them folded in the first two years.
But, the good news for business brokers is that many of them will be successful and eventually be sold – for all of the various reasons known so well. There are many sole-owned and operated businesses; and many others that are just husband and wife owned and operated businesses. Many of these, however, end up to be quite successful. There is a market for them. The government complains that very few (too few, according to it) hire employees. Unfortunately, many small businesses delay, or just won’t expand to require employees because of the cost. By the time one adds all of the taxes and insurance (including health) to a reasonable salary – it just doesn’t make sense. What the government doesn’t figure on is that much of the work that an employee might contribute is being outsourced to another one-person operation. This obviously helps maintain small business. And, don’t forget, a home-based business does not pay rent and can deduct the office portion of the home.
Business brokers should take advantage of this huge increase in small business. Home-based businesses are quite saleable and many can afford to pay at least the minimum commission and most likely even more. A good husband and wife team can be making an SDE of more than $150,000 annually – that’s a $300,000 business worst case. Yes, they may be the basis of the business, but in today’s tech world, they are probably replaceable. It just might be a bit harder to find a buyer.
InfoUSA claims that they have a list of thousands of home-based businesses. See how many are in your area. True, it’s not M&A or middle market (Is there a difference?) but it looks like main street is going to be alive and well, just located a bit off of Main Street.
What are your thoughts?