18 December 2023: Selling Businesses: What’s 2024 Look Like?
Because we’re in the business of selling businesses, from holiday parties to casual dinners at local beanaries, professional business brokers are often asked, “What’s selling?” or “What’s in demand these days?”
We occasionally do an end-of-year recap and a “what to expect next year” report. This post will address what we see for next year. And it will be a short one – the post, not the year.
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This Thursday, 21st December, on The Brokers Roundtable℠, we’re doing a Live Stream with James Wilson, Esq., on the ethics of business brokers buying part or all of businesses they are hired to represent and sell.
To learn more, visit the Announcements section of The Brokers Roundtable℠, and you can find out what other benefits Members enjoy here.
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Twenty twenty-four will be dominated by a U.S. election season that is projected to exceed levels of lunacy, hyperbole and unmitigated BS that have ever existed outside the hallowed halls of the Department of Homeland Security under the direction of the monumentally reality-challenged Alejandro Mayorkis. But businesses will, at the end of each day, be sold.
Here’s where we see the demand for next year.
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Courses! Courses! Courses!
Many of you have asked if our Flagship Course, “Learn How to Value and SUCCESSFULLY Sell Businesses“, could be made available on a module-by-module basis. Instead of enrolling in the complete course, could you enroll only in the module(s) you wanted? We’re happy to report that this is now possible.
We’ve broken our Flagship into six separate modules (or module groups) to give you all the flexibility you need to learn only what you want to learn – and we’ve moved them all over to the new Brokers Academy in The Brokers Roundtable℠ . The Flagship is still available but the modules are now available individually.
You don’t need to be a Member of The Brokers Roundtable℠ to access any of these courses but if you are, you’ll receive a 20% discount on any course you enroll in. If you’re not yet a member of The Brokers Roundtable℠, you can learn more – and get access to all the talent and resources – here.
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The Buyers
We’ve seen a continuing – in fact, growing – surge of inquiries from small and mid-size investment firms, such as private equity groups, looking for opportunities to acquire ever-smaller businesses.
These buyers include so-called “buy and hold” firms that are well-capitalized and very often industry agnostic. They also include search firms, unfunded but with committed capital, looking for targets in one or two specific niches.
Still more buying activity comes from family offices, operations set up to manage the assets of well-off families. Many people will be familiar with family offices established by such worthies as the Rockefellers, Vanderbuilts, Buffets, Musks and Bezoses where fortunes have been made and must be managed.
But there are many families not named Musk or Bezos that, often by virtue of someone selling a business, have earned what to most people is a sizeable fortune, Such families rarely have the talent to invest and manage that fortune and they hire professionals to do the job.
Those professionals reduce risk by diversifying. They don’t put all $50 million into one company or even one industry. They tend to spread the risk by spreading the wealth. They might acquire – in whole or in part – four or five businesses, often in industries they have some familiarity with.
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Our course, “Learn How to Value and SUCCESSFULLY Sell Businesses“, teaches you how to accurately value and successfully sell businesses.
Our buyers also include what’s often referred to as “search firms”. These are generally defined as firms established by one or two experienced individuals proficient in the operation of one or two specific business types and they are looking for one of those business types to acquire and run for the long term.
Search firms are generally not funded but have acquisition capital committed from accredited investors so that, when a target in identified, they can pull the proverbial trigger quickly.
There are also strategic buyers in many industries looking for ways to grow via acquisition.
Acquiring a similar or complementary business is often the easier way to expand product or service offerings, to grow or diversify a customer base or broaden the geographic area a business already serves. Acquiring an existing business that boasts proven success significantly reduces the acquiring company’s risk, provides immediate growth and market clout, and usually generates economies of scale.
And, finally, there are the entrepreneurs – or “serial entrepreneurs”, if you will; individuals who’ve sold a business, got tired of playing golf and want to get back in the fray.
What They’re Looking For
Over the past 12 – 18 months we’ve seen specific trends develop when selling businesses and those trends continue to develop. Some, in fact, are becoming more defined.
Recurring revenue is an important factor to a large portion of buyers – that is to say that companies with monthly or quarterly revenue derived from contractual commitment are very much favored. But few buyers, regardless of their preference for recurring revenue, are industry agnostic. Here’s where we’ve seen demand strengthening.
- The Trades: Contractors in commercial landscaping, HVAC, plumbing and electrical contractors serving commercial accounts such as hotels, convention venues, office buildings and the like. Also, landscaping and HVAC contractors in the residential sector with long-term customers and, in the case of the HVAC segment, an installed base with service contracts.
- Healthcare: Dental practices, home healthcare, specialized nursing, healthcare staffing companies.
- Technology: Network support, remote monitoring and management companies, internet service providers, software/application developers, eCommerce (B2B and B2C), platforms supporting such businesses.
- Transportation: Logistics, trucking companies, last mile deliveries.
- Specialty Manufacturing: Metals and alloys, coatings.
- Construction: Roofing, siding, guttering, window and door replacement.
- Testing: Equipment, inspections, remediation, certifications.
- Staffing: HR, placement, temporary and traveling staffing, professional placement (healthcare, legal, etc.)
- Marketing: Digital marketing, SEO, search optimization, analytics, AI.
- Consumer Goods: Especially food related (human and pet), agriculture
- See Businesses We’re Looking For at The Brokers Roundtable℠
Buyers usually have a minimum size requirement, generally stated in either revenue or EBITDA. We’ve seen these standards fall over the past 12-18 months meaning that more businesses now meet the minimums of most buyers. For instance, two years ago, few institutional buyers would consider opportunities with EBITDA of less than $2 million or so. These days we’re getting regular inquiries with minimum EBITDA as low as $500,000.
The Bottom Line
Twenty twenty-four promises to be pretty exciting on a number of fronts but whatever happens on the political front, several very positive elements are likely to continue or develop. Among them:
- Buyers are abundant; both institutional and, coming soon, the return of the mom and pop buyer.
- The Silver Tsunami continues to break on the shores of business brokering.
- Interest rate are likely to start dropping soon. Prognosticators far more aware than your humble correspondent are projecting three reductions next year – one reason that the mom and pop buyer will reemerge.
I’d like to hear from you. What topics would you like me to cover? How can we tailor these posts to be more useful to you and your business. Let me know in the comments box, below, or email me at jo*@Wo*******************.com.
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…
NOTE TO READERS: Our “Searching For…” feature has been moved to our online community, The Brokers Roundtable℠. It will appear there exclusively from now on.
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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 600 in the world. He can be reached at jo*@Wo*******************.com