Wyoming Business Tips for Aug. 2-Aug. 8
A weekly look at Wyoming business questions from the Wyoming Small Business Development Center, part of WyomingEntrepreneur.Biz, a collection of business assistance programs at the University of Wyoming.
By Leonard Holler, Wyoming Small Business Development Center regional director, Casper.
"What opportunities exist for buying a business?" Ralph, Cheyenne
According to a Federal Reserve survey, approximately 50,000 businesses changed hands in the United States in 2001. Three years later the Federal Reserve survey reported the number of companies sold increased to 350,000 and projected that in 2009, 750,000 would be sold.
While 23 million businesses in the United States exist today, only about five million actually have employees, leaving a lot of very small and home-based businesses (a total of about 17 million). Census data indicates that many of these are small mom-and-pop businesses.
Will all the companies be sold? Probably not. Historically only about one third will be passed on within the family and two thirds will be sold.
Looking at the baby boomer population numbers, a fair approximation of the coming flood of business opportunities is evident. A tidal wave of baby boomers reaching retirement, judging from the Federal Reserve survey mentioned earlier, indicates that the selling wave has already begun. It should steadily increase the next 10 years or so, peak during the 2020s and then slowly taper off the following 10 years. It appears through the next two decades there should be plenty of opportunities to purchase some great businesses.
What does that mean for our current business owners?
If you are a business owner, the best thing is to begin thinking about exit planning now, even if you have no intention to sell the company. The second suggestion is to get help from a financial professional trained in this field.
Once the business is sold, you will know how much it is worth instead of how much you probably could have gotten if professional advice was not obtained. The difference could be substantial.
"When business owners get professional help, they can occasionally get two or three times as much as when they sell it themselves," according to Dennis Roberts, CEO of the McLean Group LLC, a national, middle-market investment bank. "The owners will almost always be able to get at least 20 percent more than they otherwise might have."
Roberts' figures are based on extensive review of large numbers of reported transactions and comparable businesses. The dark side for all of this is that these sales will happen in a relatively short time because of the wave of business owners hitting age 65 in the next 20 years. At some point, a glut in the market place will occur and a need for more buyers could conceivably drive prices down.
The best way to avoid getting caught in that is to get ready now.
A blog version of this article and an opportunity to post comments is available at http://www.wyomingentrepreneur.typepad.com/blog/.
The WSBDC is a partnership of the U.S. Small Business Administration, the Wyoming Business Council and the University of Wyoming. To ask a question, call 1-800-348-5194, e-mail firstname.lastname@example.org or write 1000 E. University Ave., Dept. 3922, Laramie, WY 82071-3922.
Posted on Tuesday, July 28, 2009