Baby Boomers Selling Businesses Worth $10 Trillion Attract Savvy Millennial Buyers. Facilitating the Deals.

Summary

·?????? Baby boomers are selling $10 Trillion worth of their businesses, creating opportunities for both sellers and buyers, especially millennials interested in acquiring and rejuvenating businesses.

·?????? Three-fourths of baby boomer-owned businesses are profitable, making acquisition safer and smarter than starting from scratch, particularly for private equity investors.

·?????? Exit paths include family transfer, selling to partners/employees, third-party sales, or closing. Structuring deals involves asset sales, stock sales, or mergers, with tax implications.

·?????? Buyers can explore Entrepreneurship Through Acquisition (ETA) for less risky investments, leveraging existing revenue streams and operational structures of baby boomer-owned businesses.

Baby boomers’ heirs are awash in the ?“Silver Tsunami.” ?Cerulli projects that 75 million baby boomers will transfer $124 trillion to heirs ($105 trillion) and charities ($18 trillion) from 2024-2039. Many of these boomers are business owners who are selling their businesses. This article provides guidance for these retiring ?business owners, their heirs and their advisors.

This article also discusses opportunities for investors to capitalize on this once-in-a-lifetime mass exodus of baby boomer business owners. Millennials are particularly interested in buying these businesses and rejuvenating them. It’s an article for both buyers and sellers because -- after all -- they need each other. It’s an article for young and old.

?Readers of this publication are accustomed to owning publicly traded companies, but at $10 trillion this is The Biggest Investing Opportunity Of Your Lifetime; don’t miss it.? View these opportunities as unlisted stocks that won’t be on sale for long.

Here are reasons that this massive sale could be of interest to you:

·?????? You are a baby boomer business owner yourself, so you want the best price for your business.

·?????? You have baby boomer business owner clients who need your help. Helping can mean keeping those accounts.

·?????? You want to buy baby boomer businesses. Private equity investors should be particularly interested.

·?????? You see acquisition as safer and smarter than starting a business from scratch. Entrepreneurship Through Acquisition (ETA) has become popular among young investors.

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Here’s an overview of the situation

·?????? Three-fourths of baby boomer-owned businesses are profitable, according to statistics from Guidant Financial.

·?????? There are 12 million baby boomer-owned businesses in the United States, which is about half of all businesses

·?????? Baby boomer-owned businesses are worth $10 trillion, and employ over 25 million people.

·?????? Although a large number of these businesses are thriving, nearly 60 percent have no succession or transition plans in place. One in ten businesses are open to just closing down.

For more details, visit this website or click on the following image, and open the interactive graphics that are provided.

A lot is at stake. Selling your life’s work is a first time endeavor for most; it can be gut wrenching and overwhelming. Owners run businesses that they understand well. But they don’t understand the nuances of selling that business. Here are steps that baby boomer owners should follow to get what they deserve. You’ll only do this once so get it right.

Buyers can research opportunities by checking out “for sale” listings provided in the following; especially lists of baby-boomer-owned businesses. Millennials in particular are finding these opportunities very attractive as they explore Entrepreneurship Through Acquisition (ETA) where they “land running” rather than start a business from scratch.

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Exit Choices

Retiring baby boomer business owners have the following exit paths from which to choose. Percentages are provided by the Goldhill Group.

1.???? Transferring to family members (37% of owners prefer this)

2.???? Selling to partners or key employees (25%)

3.???? Selling to third parties (25%)

4.???? Closing or winding down the business (10%)

Implementing your choice can be complicated. The good news is that you can get help. See the section below on “Getting Help.”

If you choose Door #3 – Selling to third parties – you’ll need to find buyers and structure the deal, as discussed in the next section. About $4 trillion is following this path. If you choose Door #4 – Closing Down – consider listing your business just for grins before you close the doors; you might be surprised.

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The Deal

If you own a ?big company , with more than $50 million in annual revenue, you could talk to private equity investors and venture capital but these potential buyers are not interested in smaller companies. If your company is not big, or you’re leery of institutional buyers, you’ll need to shop for retail buyers.

Here are recommendations from this Forbes article for finding buyers:

• Use Your Personal and Professional Contacts
• Hire a Trusted Business Broker (see costs below)
• Advertise on Online Business Sale Platforms like the Golden Future Initiative that is specifically designed for baby boomer owners
• Use Google Search Wisely
• Network at Industry Events and Conferences

Your Challenge

1. Think about what makes your business special. Write these things down.
2. Identify what kinds of buyers you should approach, based on your goals and their goals.
3. Then, think about which of the above strategies above would work best based on your business.
4. Decide where to find the right buyers and approach them

Structuring the Sale

According to this article, there are 3 ways to structure the deal. Each has its own tax consequences that you should have your accountant review. Also, the way you receive the sales proceeds has consequences especially if you agree to things like an earn-out or contingent sale.

·?????? Asset sales

·?????? Stock sale

·?????? Merger

Setting a Price

According to this article, your sales price will typically be tied to Earnings Before Interest Taxes and Depreciation (EBITDA). The sale price of a business is often estimated by multiplying its EBITDA by a multiple that reflects industry standards or recent market movements. For instance, consumer products companies may use a multiple of 5-8x EBITDA, while healthcare businesses might be valued at 6-10x EBITDA.

This variance underscores the importance of understanding how different sectors influence valuation norms. Exit advisors can help you establish a fair price, as discussed in the next section.

Buyers also establish a fair price using EBITDA as a base, and they can shop the websites in the following section.

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Getting Help

Here are directories of professional exit service providers who can help you execute your exit strategy.

·?????? Certified Exit Planning Advisor (CEPA) Directory. The Exit Planning Institute maintains an online directory of Certified Exit Planning Advisors (CEPAs). You can search this directory to find qualified exit planning advisors in your area.

·?????? Business Enterprise Institute (BEI) Directory. The Business Enterprise Institute (BEI) offers a directory of Certified Exit Planners (CExPs). You can find these professionals through their "Find an Exit Planning Advisor" online resource.

·?????? Professional Organizations. Several professional organizations maintain directories of certified exit planners:

o?? Exit Planning Exchange (XPX): Offers a member directory of diverse experts in exit planning.

o?? Wealthtender: Provides a map-based search tool to find CEPAs near you.

o?? Exit Factor: Offers a directory to discover certified exit planning advisors in various locations.

·?????? Like selling your home using a broker, there are directories of business brokers like this one from BizBuySell.

To find the most suitable service providers for your needs, use these resources and then verify the credentials and experience of potential advisors before engaging their services.

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Costs

Of course – much like selling your house by owner -- you can sell your business on your own by listing on websites like Baby Boomer Businesses for Sale.

But if you decide to get help, the Business Enterprise Institute provides the following guidance on fees you can expect to pay. Both sellers and buyers can use these services.

·?????? Business broker retainers – These can range from a one-time charge of a few thousand dollars for a small pizza shop to $10,000 or more per month for businesses with more than $10 million in value.

·?????? Business broker success fees – Many planners use the Double Lehman scale (a common, industry-accepted formula) to calculate their success fees based on the gross sale proceeds

·?????? Attorney fees – Rates will vary based on the geographic location and the attorney’s level of expertise but will typically range from $300 to more than $1,000 per hour.

·?????? CPA fees – Your CPA should be involved in the tax planning aspect of your sale and spend at least 10 to 20 hours on your transaction. CPA rates can vary from $200 to $600 per hour

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The Other Side of the Coin: Buyers of Baby Boomer Owned Businesses

Up to this point, this article has been directed at sellers. Now I turn to buyers, most of whom are Millennials. Younger people are finding it appealing to employ entrepreneurship through acquisition – ETA. ETA is a model where aspiring entrepreneurs purchase an existing business rather than starting a new one from scratch.

This process allows the buyer of the business to hit the ground running with a business that already has a revenue stream and operational structure. In short, the existing customers and cash flow of these businesses make them less risky investments than new ventures. Buyers can use the links in this article and “By Owner” directories like the Baby Boomer Businesses for Sale Directory, ?to shop for acquisition candidates.

If you prefer a more established company, some publicly traded businesses are owned by baby boomers, for example:

·?????? Welltower (WELL): A real estate investment trust (REIT) that specializes in healthcare infrastructure?

·?????? Tanger Factory Outlet (SKT): A business that combines social integration with consumer retail discounts?

·?????? Walgreens Boots Alliance (WBA): A holding company that owns the retail pharmacy chains Walgreens and Boots?

·?????? Natus Medical Incorporated (NTUS): A medical devices maker that provides newborn care and neurology products and services?

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?Conclusion

If you’re a baby boomer business owner, I hope this article helps you; you’ll only do this once, so get your best price. If you’re not but you know baby boomer business owners, please share this article.

If you’re interested in capitalizing on this great once-in-a -lifetime opportunity, check out the resources provided in this article for possible acquisitions.

I wish you lucrative great success.