Selling a Business: 2025 Outlook
5 May 2025: Selling a Business: 2025 Outlook
Stubbornly high interest rates. Tariffs both real and threatened. Elon running roughshod through Washington and lefties going from lionizing Teslas to torching them in response. What’s next, boys playing on the girls’ teams? Oh, wait…
With what seems like an overabundance of volatility – not to mention crazy – bearing on businesses in almost every sector, selling a business was bound to be impacted, one way or another. As 2025 has started out with nothing less than a convulsion of economic fireworks, we thought we’d take a shot at describing what we’re seeing and maybe even do a little prognostication.
Let’s start with the former.
We receive at least five – and often more than 10 – inquires every week from buyers. Most provide fairly descriptive outlines of what they’re looking for; size of business (expressed in earnings), industry(ies) favored, possibly a preference for “family” businesses and any geographic limitations they may have.
Some go into deeper detail, describing the type of transition they prefer (i.e., owner retiring, controlling interest, etc.). A few even detail their own background and capabilities in an attempt to be considered more favorably.
Who’s Buying?
We, like most business brokers and small M&A firms, work in two market segments defined as the Main Street Market – businesses valued between roughly $250,000 and $2 million – and the (lower) Lower Middle Market – businesses valued up to $25M or $30M. The buyers in each of these markets are different.
For buyers primarily interested in “how much will this business put in my pocket?” – financial buyers – most of the activity is in the Main Street Market. For buyers more interested in how a particular business will impact their current business operations or, in the case of private equity firms, how an acquisition will compliment their current portfolio – strategic buyers – the Lower Middle Market is where they generally fish. (When selling a business, it’s important to know who your buyer is likely to be.)
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Strategic buyers can be a modest-size business looking to expend via acquisition. An HVAC company in one county targeting a similar company in an adjacent county, a move that will double their geographic footprint and generate better economies of scale is one example. A plumbing contractor targeting an HVAC company that will bring in a completely new list of customers for both operations is another.
But “strategic” buyers also include firms – including private equity – who are engineering so-called “roll ups”. For instance, a landscaping contractor might try to acquire multiple regional competitors. Private investment firms (PEGs) have been formed to engineer roll ups in industry sectors as diverse as managed service providers (MSPs) and car washes (with membership programs).
What’s Important to Them?
We’re seeing strong interest for professional services companies, particularly businesses with an established client base in a non-cyclical industry. Likewise, home and commercial services are seeing increased interest. Because of this demand, selling a business in these sectors will generally produce significant interest which, in turn, generally results in healthy valuations.
But continued high interest rates and the treats of tariffs mean the overall business environment is unsteady and buyers – private equity firms and strategic, in particular – are being selective and looking for businesses that show real staying power. Such buyers look for strength in these areas :
- Client loyalty – Have clients and customers continued to do business with the company? Client retention is extremely important.
- Management – Is a seasoned team of managers primarily responsible for day-to-day operation? Are employment agreements in place to keep the key players involved?
- Systems and Processes – Are operational systems and processes in place and followed? This helps ensure operational continuity post-acquisition
- Recurring Revenue – Are sales mostly contract-based resulting in ongoing revenue or are they “one-offs” and must be repeated constantly to generate revenue?
- Brand Reputation – Is the business admired in its industry and highly valued in its community?
What Sectors are They Focused On?
As stated at the top of this missive, we constantly receive inquiries from buyers, both financial and strategic. Many of these inquiries are posted in “Businesses We’re Looking For…” in The Brokers Roundtable℠, our online support platform for our network of brokers.
Based on the inquiries over the past 18 months or so, the demand from strategic and private equity buyers is strongest for any businesses with recurring revenue and specifically for commercial and home services firms, such as roofing, landscaping, HVAC and similar contractors.
Contracts with customers give a buyer confidence that a certain amount of revenue will be coming in the door over the next months or years. Such confidence has value. Buyers will pay for that certainty.
But these are not the only sectors being looked at. Any sector with expected growth – whether such growth is based on demographics, governmental action or business evolution – is, judging by what we’re seeing, of interest to multiple buyers.
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Don’t Miss Out on the “Silver Tsunami”!
For example, all of the following sectors are repeatedly represented in the flow of inquiries we receive:
- Warehousing and distribution/trucking companies – The centralization and subsequent distribution of goods.
- Healthcare – both clinical and non-clinical. As the population of most countries age, healthcare is a growth industry.
- Food manufacturing and distribution
- Other sectors with long-term potential include technology, energy, utilities and life sciences (with applications in health, agriculture, medicine) and the pharmaceutical and food science industries.
- Technology is of particular interest, especially companies that are integrating AI or cloud solutions.
The Bottom Line
We expect the political volatility of the first quarter of 2025 to continue with some greater or lesser impact on the market for selling businesses.
There is some political pressure to reduce interest rates, a move that would certainly help business transitions by making financing less expensive and easier to obtain. But as many of us of a certain age know, interest rates are not very high by historical standards.
The bottom line in this discussion also happens to be our tagline: “Every Business That Doesn’t Fail Will Sell; EVERY ONE!“, and we live by that expression. Whatever time period you’d care to look at, regardless of the seeming impediments, businesses were bought and sold. THAT is the real bottom line.
“Anyone who says that businessmen deal only in facts, not fiction, has never read old five-year projections.”
– Malcolm Forbes
If you have any questions or comments on this topic – or any topic related to business – I’d like 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 safe and profitable week.
Joe
Searching For…
A NOTE TO READERS: Our “Searching For…” feature has been moved to our online support platform, The Brokers Roundtable℠. It will appear there exclusively.
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The author is the founder, in 2001, of Worldwide Business Brokers and holds a certification from the International Business Brokers Association (IBBA) as a Certified Business Intermediary (CBI) of which there are fewer than 1,000 in the world. He can be reached at
jo*@Wo*******************.com