Selling a Business: The Millennials Market
Are Millennials buying business? Do they have the chops?
We hear a lot about Millennials starting internet and technology businesses but few of them will be the unicorns that Wall Street dreams of. But are they buying existing business?
Last week’s post was a discussion of the prospects of the owner of family businesses passing those business on to their kids or other family members of the next generation. As a rule, heirs are reluctant to take over the family business and that post provided some pretty specific evidence of that which was derived from a recent report on small business from UBS, the international Swiss bank.
But that report included a much more interesting finding about millennials that not only supports the conclusion that the chances of the owner’s kids will take over the business but raises concerns not only about the ability to find buyers in the younger generations but also about millennials being able to make up their minds.
The UBS report contained some interesting statistics from a survey of millennials about business ownership and risk. On the one hand, 72% of millennials surveyed said that starting a business appeals to them. They stated that they are “…enticed by the independence, the opportunity to pursue a passion and the potential for financial gain.”
On the other hand, 83% of Millennials think the risk of owning a business is too high.
Are Millennials Buying Business?
Compared to the Baby Boomer generation, Millenials – at least according to the UBS survey – appear to be too scarred to own a business.83% of Millenials think the stress level of owning a business is “too high”. This versus 64% of Boomers. And 77% think that business ownership is “too risky”. Versus 43% of Boomers.
“Owning a business is very risky. You usually provide the capital, and you take on legal and other risks. As an employee, the employer takes that on for you.”
– 35 year old surveyed
One would think that if the results of the UBS report are accurate – and there’s no reason to feel they aren’t – the future does not bode well for Boomers who own businesses and are hitting retirement age at the rate of one every 57 seconds! And, according to a study by the university of Minnesota, that trend is projected to continue until 2035.
What’s A Business Owner To Do?
This seemingly risk-averse generation – born between roughly 1980 and the early 2000s – could pose a problem for any business owner that plans to eventually sell their business, not just Boomers.
But the news is not all bad. The UBS report contained some positive findings, as well. Not so much about Millennials but more about investors in general.
From the report: “When wealthy investors were growing up, few considered owning a business to be the most respected career path. Over time, however, entrepreneurship has grown in stature and popularity.
“Half of wealthy investors believe owning a business is one of the most prestigious careers to pursue, now and in the future. Most also believe that investors just starting a career would rank entrepreneur at the top of the list.”
Being an entrepreneur is increasingly popular and many investors believe now is the time to own a business.
Most investors have been favorably impacted by a positive environment for business and believe this is an ideal time to own a business. Their outlook on the economy is the highest it’s been since the financial crisis (72% highly optimistic), while recent tax and regulatory reform have made the idea of owning a business even more attractive.
“Now that the economy is picking up and consumer confidence is on the rise, I feel more secure in pursuing a business venture.”
– 40 year old surveyed
What Does All This Mean to Business Owners?
All this means is that, even if the level of drive and risk-taking is as low as it purports to be, there is – and will continue to be – high demand for businesses when owners wish to sell.
The economy is good, interest rates are still at historical lows and there’ currently a bunch of money in the market place looking for good investments.
And the list of buyers is long and well-funded. From family offices and wealthy individuals to private equity groups and strategic acquirers, there are plenty of buyers out there right now, particularly for lower middle market business.
In fact, the Main Street, or “Mom and Pop”, market is also quite frenetic. People who’ve dreamed of woning their own business for years see thi as the ideal time to make the move. Most business brokers are busy!
Our course, The Basic “How-To” of Becoming a Business Broker”, teaches how to become a professional business broker.
Become a Professional Business Broker…
What Does it Mean to The Business Broker?
Well, this is pretty simple.
If you’re working in the general Main Street market, you’re probably getting handsome returns from your general marketing.
However, in the lower middle market, you need to know who your buyer is. Describe them for each listing you take. And then you need to know where to find them and how to approach them. Our course covers all this.
The Bottom Line
Selling a business takes planning, timing and patience. It also takes the right team, most notably the right business broker. Based on the level of current market activity and the number of buyers out on the prowl, this appears to be an excellent time to bring a business to market.
But the UBS report and the one from the University of Minnesota suggest that more and more business will be coming to market over the next decade plus. This could put some downward pressure on prices but significant upward pressure on the demand for qualified professional business brokers.
If you’d like to be come one, let me know.
If you have any questions, comments or feedback on this topic – or any topic related to business – I want to hear from you. Put them in the Comments box below. Start the conversation and I’ll get back to you with answers or my own comments. If I get enough on one topic, I’ll address them in a future post or podcast.
I’ll be back with you again next Monday. In the meantime, I hope you have a profitable week!
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