Baby Boomers Retiring – Selling Their Businesses
Roberta Bonoff, the new owner of Creative Kidstuff, a Minneapolis-based toy store chain, noted that the previous owner was ready to retire and sell. Baby boomers nearing retirement are fueling an increase in small business sales, as more buyers feel confident in the improving economy to expand their ventures through acquisitions. BizBuySell.com, an online marketplace for small businesses, reported a 56 percent increase in closed sales in the first quarter of this year compared to the same period in 2012. According to a survey by Pepperdine University, the International Business Brokers Association, and M&A Source, retirement was the leading reason for business sales in the last quarter of the previous year and the first quarter of this year.
Michael Schuster, a broker with World Business Brokers in Miami, observed a significant uptick in seller activity starting in January. Many sellers expressed a desire to avoid another economic downturn and capitalize on current conditions. Sales in Florida are so robust that Schuster’s brokerage is opening two additional offices in the state. The majority of sellers are baby boomers, many of whom lack family members interested in taking over their businesses. Some owners prefer to sell part of their companies, effectively bringing on a partner to share the risk.
Honey Rand, after 17 years of running her public relations firm in Tampa, Florida, is contemplating selling her business to focus more on client work rather than administrative tasks. Rand, who has been approached by prospective buyers twice in the past decade, expects to remain with the company for a transitional period post-sale.
In California, Dave Richards, owner of Keystone Business Advisors, described the sales trend as a steady increase rather than a sharp spike. He attributes the growth to pent-up demand among baby boomers. One such boomer, Walt Pocock, decided to sell his Chino, California-based business, Palo Verde Landscape Management Co., after realizing he was ready to retire. The business quickly attracted multiple bidders, and Pocock secured his full asking price.
The trend of baby boomers selling their businesses is expected to keep the small business market active for years to come. Bob Balaban, managing director at Headwaters MB, predicts that strategic acquisitions will play a significant role in this transition. Companies looking to grow quickly often find it more efficient to acquire existing businesses rather than building from the ground up.
Healthcare-related businesses, including medical billing firms, pharmacies, and medical practices, are in high demand, according to Richards. However, interest in restaurants and retail businesses remains lower due to thinner profit margins and ongoing struggles in those industries.
Schuster notes that many potential sellers were previously hesitant due to economic uncertainty, but the improving conditions have prompted them to move forward. Mike Carter, CEO of BizEquity, reports that growth companies are receiving nearly 15 percent more than they did four years ago during the recession.
Creative Kidstuff recently expanded by acquiring Sensational Beginnings, a 26-year-old online and catalog toy retailer. Bonoff stated that the acquisition was an opportunity to grow their online business. BCER, an engineering firm in Colorado, purchased Rimrock Group to expand into a new area of expertise more rapidly than they could have through organic growth.
Jodi Hamilton, now the owner of both Dream Dinners franchises in Chicago, seized the opportunity to buy another franchise in the city, expanding her territory and market presence.
These examples highlight the ongoing trend of baby boomers selling their businesses and the strategic opportunities such sales present for buyers looking to grow their operations.