14 Feb Around the Web: A Week in Summary
A recent article posted by Securian entitled “Small business owners plan to exit, but aren’t exit planning” gives an overview of the Securian Small Business Owner Life Stage Study which focused on successful private businesses in a variety of industries. The study found that 72% of small business owners do not have an exit plan and are not taking action towards an exit strategy. Only 14% have a formal exit strategy in place and another 14% are working on a plan but have not completed it yet.
Despite the lack of planning, 54% of business owners expect to leave the business within 10 years and 29% expect to leave the business within 5 years. The most common exit strategy is to sell or transfer the business to either a family member, partner/key employee, or a third party.
As a business owner, you have to prepare and plan for the future even if you don’t plan on leaving your business anytime soon. You can’t run your business forever and it’s never too early to start creating an exit strategy.
A recent article posted by Forbes entitled “Baby boomers are selling their businesses to millennial entrepreneurs, and it’s a brilliant idea” highlights the fact that many baby boomers will soon be looking to sell their businesses and this creates excellent business opportunities for millennials. Many of these baby boomer businesses are well established having no debt, loyal customers and proven business models which make them a great opportunity for young entrepreneurs to take over instead of letting the businesses close down.
Here are 7 places to start looking for these baby boomer businesses:
- Local chamber of commerce
- Local CPAs
- Local real estate brokers
- Local community bankers
- Business brokers
- Go directly to the business owner
- Craigslist or eBay
Overall, staying connected with local professionals in your area as well as being proactive in searching out businesses for sale will help you to find a great business opportunity. Once you find a legitimate business, find out if it’s making a profit. If so, ask why the owner wants to sell and if not, find out why.
A recent article from Forbes entitled “Selling your business in 3 to 5 years? Buy another company now” explains how acquiring another company can significantly increase the value of your business before you decide to sell. The first thing to understand is that the multiple of earnings paid for a company increases at an accelerating rate with size. Larger EBITDA means larger multiples, and larger companies are generally less risky so a buyer is willing to pay more.
Acquiring another business may also amount to cost savings and operational improvements when the companies are integrated. Combine these savings with organic revenue growth and a larger multiplier when the companies are combined, and this can add up to a huge increase in your company’s value. So if you’re thinking of selling within 3-5 years, this could be a good strategy to consider.