Small businesses are being sold at paces that are record breaking compared to recent years. A market report found that the sale of small businesses with annual revenues of under $500,000 and medium size businesses with annual revenues of $500,000 to $2 million increased by 6 percent during the first three months of 2015, continuing an upward trend in small and medium sized business sales that has been on pace for roughly 2 years.
More entrepreneurs are buying small and medium sized online businesses that are already established and thriving rather than launching startups, according to experts, and part of the reason for this is that the supply of businesses for sale continues to boom. Baby Boomers are being credited with the huge influx of small and medium sized businesses that are currently for sale in the U.S. Here are some of the reasons why Baby Boomers are selling in record numbers:
- Retirement. The youngest segment of the Baby Boomers will turn 50 years of age soon and the oldest members of the generation have already reached retirement age. In years past, small and medium sized businesses were often turned over to family when current owners retired, but with more people going to college than ever before, children of small and medium sized business owners are becoming less interested in simply following in their parents’ footsteps. This has left many Baby Boomers without a succession plan for continuing their families ownership of that family business. Selling their businesses allows Baby Boomers to retire comfortably and know that their legacy is being carried on by new owners.
- Fatigue. The reasons why Baby Boomers started their own businesses vary greatly. Some are more recent online business owners who began working for themselves when they lost jobs during the recession that hit back in 2007 and 2008. These online business owners may never have had a real passion for their new endeavors and are now ready to exit the business. Other Baby Boomers inherited their companies from family or founded them at a young age and converted or added an online component to them as years went on. These business owners may be beginning to feel fatigue now that they have reached middle age and are anxious to sell as a result.
- New Opportunities. Baby Boomers aren’t just selling businesses. Many of them are still entrepreneurs looking to start new companies or buy existing ones to pursue new endeavors. For these small and medium sized online business owners, selling their current businesses can provide funds for a new venture.
Things Baby Boomers Need to Know Before They Sell
While there are a number of good reasons for selling an online business, Baby Boomers should be aware of a few things before they put their small or medium sized businesses on the market:
1. Your business may not be worth as much as you believe.
Your online business is your baby. You nurtured it and grew it and invested time, money and energy in its success. To you, it has tremendous value. That’s undeniable. What isn’t clear is how much your company is actually worth on paper. Many small and medium sized business owners are dismayed by the actual value of their companies, believing that they had an asset of much higher value. Potential isn’t what drives the price of a business; demonstrated proof of success is. That’s why it’s important to ensure that you have well organized financial documents professionally prepared for your business prior to moving forward with a sale.
2. You need to think about the future.
Selling an online business will take time and focus, but you can’t afford to get caught up in thinking about the sale and forget about what will come next. While you still own your business, take the time to figure out how much income you will need and what changes you may need to make to your lifestyle when you no longer own your business. This will help you to avoid any unwelcome surprises after the sale is complete.
3. You have to decide how you want to be involved with your business post sale.
Even if you believe that you can’t wait to be free of your business, you’re likely to go through a period of challenges in the transition after the sale. Some business owners deal with this by remaining involved with their businesses as a consultant or even as an employee for months or years after the sale is complete. Others prefer to walk away from their businesses entirely. You’ll need to determine which option is right for you and for your buyer.
No matter what your age, if you’re considering selling an online business, an online business broker can help you get the best possible price for your company and ensure a smooth transaction. Contact us today to speak with an online business broker and learn more.