Business Values Affected By Supply

If you are planning to sell your business in the next five years, be very aware that the timing of your sale may have a significant impact on the value. Your business value may fall if you wait too long to sell. You need to consider selling sooner rather than later to avoid the mass sell-off.

An Inc. Magazine survey conducted in the USA in April 2008 predicted that 65 to 75 percent of small businesses will go up for sale in the next five to 10 years due to retirement alone. Our demographics in Australia would be similar to the USA. This survey was conducted in 2008, so we can now say that these mass sellers are due to flood the market from three years on. We are not scaremongering. The numbers speak for themselves. Large numbers of owners will retire in the next 10 years. You are already smarter than the average owner by reading this article, so please take notice and let us help you maximise your value in your business.

Baby Boomers Retiring

Baby Boomers were born from 1946 to 1964, which means that the oldest turn 64 years of age this year. Our own sale statistics show us that the typical business seller is between 58 and 65 years of age, with their main reasons for sale being retirement and ill health.

Recent reports and surveys from Australia and the USA all indicate that the retirement rate of employees and business owners is due to increase because of the large numbers of people in the early-60s age bracket. Our government is aware of this and is extending the retirement age to 67 and 70 over the next few years to try to slow down the increasing numbers of retirements in the workforce.

Most business owners aim to retire earlier than the norm. The GFC over the past two years has had a dramatic negative effect on superannuation funds, which has caused many intending business owner retirees to put off retirement. They have continued to work in their business to boost funds for retirement.

The combined effect of less retiree sellers over the last two years and the growing number of potential retiree sellers over the next 10 years means that once superannuation funds get back to previous high levels, there will be a larger-than-normal number of sellers in the market place.

This bubble of retiree sellers over the next 10 years will mean a higher supply of businesses on the market. Demand may remain the same, dependent more on the economy rather than numbers of younger Baby Boomers (45 to 55 year age group).

Buyers Market 2012 -2020

The result of the increased supply means that the market will become more of a buyer’s market than it is now. Generally, sale prices will fall and businesses will probably take longer to sell. But do not despair - we can help you maintain value and make your business more attractive to sell by grooming your business for sale.

Sell In 2010-2011

Our advice to business owners intending to sell over the next five years is:

1. If you can afford to, sell sooner rather than later and ideally during 2010 or 2011.

2. Contact Weyman Jones Business Brokers and Valuers to arrange for a current market valuation.

3. Consult your accountant and superannuation advisor to assess your current situation and future requirements. Ask yourself, “Can I afford to retire now and if not, when?”

4. Let us commence an exit plan with you now to increase value and saleability (even if you’re planning to sell later).

5. Take serious notice of what we have to say because it will be too late in three years’ time when the market will become full and sluggish until 2020.