Are you planning to make 2019 the year you start your own business?
One way to break into entrepreneurship that you may not have considered is buying an existing business.
Even if you’re already in business, acquiring a related or complementary business can be the perfect way to expand.
In fact, 2019 is poised to be a great time for business buyers, according to BizBuySell.com’s Third Quarter 2018 Insight Report. The financials of small businesses for sale hit record highs in Q3 2018. This has allowed sellers to ask for and receive more money than ever before.
While that might sound like bad news for anyone who’s hoping to buy a business, BizBuySell reports that it’s actually a win-win situation. Yes, buyers are paying higher prices, but they’re also acquiring healthier businesses in return, so they have a greater chance of success. The result is a level playing field for both business buyers and sellers—and more small businesses changing hands than ever before.
Why is buying a business so hot?
The sheer number of retiring baby boomers is a key factor in the booming market of businesses for sale, according to BizBuySell. Baby boomers still own most (53%) of the small businesses in the U.S., and nearly 60% of boomers plan to sell their businesses within the next two years or less (compared to just 32% of all current small business owners). Based on this data, BizBuySell doesn’t expect the supply of businesses for sale to slow down anytime soon.
Who are the new business owners?
Many of the big demographic changes taking place in the U.S. are reflected in the diverse makeup of business buyers, BizBuySell reports. For instance, while Caucasian men make up the majority of current business owners, women, African-Americans and younger people make up a growing proportion of business buyers. A third of business buyers are non-natural-born citizens; of that group, almost two-thirds are first-generation immigrants.
What businesses are most popular?
What kinds of businesses are most popular to buy right now? According to BizBuySell, here’s the breakdown:
- Service businesses - 34%
- Retailers - 32%
- Restaurants – 20%;
- Other – 10%
- Manufacturing – 4%
What to know before you buy a business
No matter how excited you are about a potential opportunity, you need to be careful and do your due diligence before buying a business. Here’s what to do:
- Enlist the help of a good business broker who understands your needs.
- Research the industry you’re considering and know what projections and trends will affect it in the coming year.
- If you’re already in business, assess how the business and its staff can fit into your current operations.
- Know the business’s reputation and any hurdles that need to be overcome. Is the business in need of a turnaround?
- Why is the business for sale? Don’t be afraid to ask tough questions that may uncover problems.
- Get all the financial facts and have your accountant go over the numbers with you in detail.
- Ask about any legal issues that may hamper your ability to do business.
While doing your homework is important, you also need to strike a balance. Research as much as you can. Then, know when it’s time to trust your gut.
Do you need advice or just a listening ear to help you sort out the pros and cons of buying a business? Contact a SCORE Mentor and you can get help with all aspects of the decision, offline or online 24/7.
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Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.