When people hear the terms “Mergers & Acquisitions” they usually envision large corporations combining or changing hands. However, it also refers to sales and acquisitions by existing small business owners and budding entrepreneurs. Historically speaking, there has never been a better time for business acquisitions. 2018 was a record year for business sales, and when all is said and done, 2019 is expected to surpass it. This can be attributed to both demographics and favorable lending conditions, and is good news for both buyers and sellers.
A study done earlier this year by Guidant Financial and Lending Club found that 57% of all business owners surveyed were over the age of 50. Baby boomers, representing a disproportionately large percentage of the population, are pouring into retirement. Approximately 10,000 people in the United States are turning 65 every day. A large number of these people are small business owners, and a large number of their businesses are successful and profitable. This is fueling the market for business sales with a steady supply of for sale listings.
While it may seem that an increase in the number of business sales could water down the market, 2018 data shows that it did not negatively affect prices. Taxes are lower right now, which help business owners who sell to get a bigger net profit. Buyer demand also remains very high, as more people are looking to move away from traditional employment and become small business owners and entrepreneurs. The conditions are also prime for lending, making it easier than ever for aspiring business owners to borrow money to finance their purchase.
The SBA has made several changes to their loan programs in the last couple of years, making it easier to obtain a small business loan. There are now lower equity requirements, so potential buyers can finance up to 90% of their ventures, and even roll in closing costs and other soft costs. Interest rates are also lower, and loan terms are more favorable, making it cheaper to borrow. More franchises are eligible for loans, which gives buyers more options. Loan funds can also be used to finance a wider variety of things, such as expansion, materials & supplies, commercial real estate, machinery and fixtures, in addition to other uses.
A lot of people dream of becoming business owners and starting their own companies. With so many good businesses entering the marketplace, buying an existing, proven company is an excellent alternative to starting one. When acquiring someone else’s business, a lot of the hard work, such as planning, finding a location and establishing a customer base has already been done. A lot of businesses for sale have great growth prospects as well, so they can potentially become far more successful and valuable than they already are.
Right now, Southwest Florida is a great place to invest in an existing business, or sell one you own. A 2019 study performed by 24/7 Wall St. and published by USA Today shows that Fort Myers, Sarasota and Naples are among the top 25 fastest growing cities in the U.S. While a significant portion of the people moving here are retirees, many are people looking to start a new life and trying to find a business opportunity that will allow them to do so. Someone who is looking to sell a business could benefit from this huge influx of potential buyers. A larger population also means more potential customers for a buyer who is considering purchasing an existing business and growing it.
Corporate Investment Business Brokers has been helping Southwest Florida business owners and entrepreneurs buy and sell local companies of all sizes since 1986. With over 3,000 successful sales and purchases totaling over $1 billion, we have the expertise and experience to guide you through your sale or acquisition. If you’re looking for a new business opportunity, check out our latest business for sale listings. If you’re thinking about selling a business and want to find out how you can begin the process, contact us, and ask about getting a free business valuation estimate.