How to Buy a Baby Boomer Business
Bill, who happens to fall in the millennial age range, was in my office recently to begin the process of buying a business.
He graduated college and began a corporate sales career, but coming from a long family line of entrepreneurs, he knew it was only a matter of time until he was in business for himself.
It’s a good time to be a millennial — or even a gen-Xer — looking to buy a business. In the coming years, I believe the market will see many baby-boomer-owned businesses come up for sale.
While it might not create a full “buyer’s market” effect as many people predict, buyers will have advantages they haven’t seen in many years.
Here’s what to expect as a business buyer in the near future, and how to make the most of market conditions.
1. Be discerning
While there might be more businesses hitting the market in the coming years, there is no guarantee that they are all good. The benefit is that there will be more variety, but you still need to be careful in your due diligence.
Don’t get swept up in the hype. Stick to your due diligence system.
2. Cash will still be king
In order to make an acquisition, be sure to look at businesses you are qualified to buy. Don’t think that just because it is now more of a buyers’ market that you are a buyer for any business you come across.
Understand your down-payment capabilities, look into financing requirements and be realistic. With interest rates rising, it is more important than ever to focus on healthy businesses and banks who will lend to you, always staying within range of your capabilities. Over-leveraging can cripple even a good business.
3. Bottom-feeders get bottom businesses
Although the baby boomer sellers might not be in as strong a position as in years past, they will still demand a premium for their healthy business. This is their baby that they have nurtured from inception.
Though there are more businesses on the market, quality businesses will still be sought after and prices will remain fair. Don’t enter the market looking for a deal unless you are also comfortable with a “project” business that needs a lot of work.
4. Bridge the generation gap
In the next few years, we will see many businesses pass from baby boomers to gen-Xers or millennials. But as always, remember that business transitions are very personal and emotional transactions. Keep it that way.
Acknowledge all that the sellers have built, take full advantage of learning from their story and experience, and show them respect.
As Bill left my office the other afternoon, I boiled it down like this: The more things change, the more they stay the same. Don’t expect that a perfect business will fall into your lap based on what you hear in the media or from friends. But, if you do your work and stay realistic, I think you have a good shot at being rewarded by a business transition market unlike any we’ve seen before.