Selling a Business: Know the Competition
17 February 2025: Know the Competition
If you’re selling a business, do you know how much competition is out there?
We ask that question of every potential client. Most of them think that we’re referring to the number of buyers that will be interested in their business; they’re expecting a bidding war. But that’s not what we’re referring to.
We ask that question because we want to open up a very serious conversation about something that will not only impact the likelihood of a successful sale of our client’s business but also underscore the critical need to understand their business’ value. It’s also something that very few business owners think about.
This year marks a milestone for America’s 76 million Baby Boomers, with the youngest hitting their early 60s and the oldest turning 80. This group – among the most entrepreneurial in history – includes owners of some 12 million privately held businesses, with an estimated $10 trillion in assets.
A phrase describing this trend was coined about 20 years ago by one of our earliest licensees. He described this demographic bubble as the “Silver Tsunami”.
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We’ve posted a number of times in the past about this phenomenon and actually use it as an example when speaking to real estate professionals about one of the main reasons they might consider adding business brokerage to their real estate services. (Here’s the original post.)
It’s clear that a massive change in ownership is riding the crest of this tsunami. Sadly, though, you might not know it from talking to the owners themselves. In a recent survey, about half said they had no plans to retire. But other surveys – some referenced in that original post – conclude the opposite. But the important point we often have to remind them of is that they will definitely retire. One way or the other, of their own volition or not, their ownership of their business will come to an end.
It’s important to note that decisions to sell are not made solely based on the age of the business owner. People’s perception of economic conditions, interest rates, buyer sentiment and tax burdens are all triggers.
(In fact, last year business owners in the United Kingdom were storming the exits because the Labor Party, brandishing the play book of liberals everywhere, were promising to raise capital gains taxes, the most impactful negative aspect business owners face when selling. And not to be outdone, Canada hopped on that same train – which ultimately led to Justin Trudeau, the prime minister and head of the Liberal Party, resigning last month.)
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REALTORS! Our course, “Learn How to Value and SUCCESSFULLY Sell Businesses“, teaches you how to accurately value and successfully sell businesses.
Don’t Miss Out on the “Silver Tsunami”!
In the U.S., we dodged such a bullet last year. But while the political and tax environments certainly can impact business decisions, they have no impact on this demographic wave. More businesses are coming to market than at any time in history – and this condition is likely to continue for another 10 years.
And THAT, faithful readers, is the competition we talk to clients about. More businesses coming to market means more competition – for the seller!
Business owners seldom realize that ever buyer has dozens of choices. When selling a business this fact has to be clearly understood. And it’s our responsibility to explain this.
Selling a business is, in some ways, a competition; a “race” viewed by buyers as one to find the best option. Few owners consider this when they begin to calculate what they “need” when they sell. Failing to recognize what the competition is will almost certainly result in disappointment.
As unbelievably cool and attractive as it is, yours is FAR from the only business small manufacturing business, restaurant, chain of tax preparers, mid-level distributor, commercial service contractor, etc., etc., etc., currently on the market. As such, if you want to sell, you’ve got to be competitive.
Yes, “competitive” refers to price – at least as it relates to value. But is also refers to terms such as how much time you’re willing to stay during a transition, whether you’re willing to offer selling financing, whether, if you’re in the U.S., you (or your broker) have gotten your business pre-approved by the Small Business Administration, if you’re flexible on a closing schedule and a dozen or more other terms. A business owner that keeps the fact that he or she has competition in the sale of their business, is generally one who understands the need to be competitive.
The Bottom Line
Selling a business is takes knowledge, experience and following the process. Part of that is understanding the market, the economic outlook, the direction of interest rates, the types of buyers likely to be interested in the business and the fact that buyers have plenty of options. That last item is your competition.
Whenever you come to market and pretty much wherever you are, your business will be competing for the buyers’ attention with many other businesses. To be successful in selling a business, yours needs to be seen as “best in show”.
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
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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