Industry Forecast: Mind the Generational Gap
Business sales are generations in the making
There are several reasons why business brokerage industry is growing at a rate of 3% per year. Favorable market conditions, low interest rates, and the calm before the tax reform storm are a few of them, but there is another factor at work that is driving both the supply and the demand: the generational changing of the guard.
Baby Boomers go from bootstraps for beach sandals.
The Baby Boomer generation is finally retiring, but not without a fight. Their crop of self-made businesses is ripe for the picking, but many business sellers want to hand-select their predecessor. Legacy is an important consideration for this age group and, if respected and approached thoughtfully by the business broker, could result in a favorable agreement for both the buyer and the seller.
Retirement or no, there will be a handful of Baby Boomers who segue from one industry to the next, finding revitalization in making their mark in yet another part of the world. These investors will have capital to burn and will seek companies that would benefit from their expertise, if not their elbow grease.
Generation X owns it like a boss.
“If you don’t build your dream, someone will hire you to help build theirs,” said Tony Gaskins. As 2017 unfolds, more and more mid-level executives from corporate America are choosing to contribute to their own bottom lines instead of padding someone else’s, and their forays into business ownership are proving a worthy investment, both in their energy and capital. Many have used a portion of their 401k for a down payment, investing in the grounded success of their own businesses as an additional source of income instead of the instability of the stock market.
As a potential business buyer, Generation X comes with the added benefit of upper-level management experience. They know the right employees are crucial to the success of a business and will see additional value in scalable companies with good teams in place. They also know how to lead an organization, which means they aren’t afraid to lay out firm expectations, reward accordingly, and dig in with their teams when needed to get the job done.
Millennials do it their own way.
While the Baby Boomer and Generation X age groups would love to hand down their successful businesses to familial heirs, their progeny isn’t having it. Millennials are trailblazers by nature; fewer and fewer of them seek to follow in the footsteps of their established family members, seeking instead to use their experience in working for a family business to create a new enterprise of their own. This often means creating careers in unconventional ways, including entering business ownership instead of collecting a paycheck.
These prospective entrepreneurs lean more toward purchasing established businesses than their start-up cousins, preferring to hit the ground running rather than dig their own foundations. Unlike previous generations, Millennials have spent their entire lives surrounded by social media, marketing, and international commercialism, and they now offer a unique combination of capital, experience, and passion to reinvigorate an established brand. And if they can also influence the world and make a name for themselves in the process, all the better.
The key to brokering a timely and successful deal is in understanding the unique parameters and motivations of everyone involved. While these are blanket statements for generations, the larger message is that there are opportunities in buying and selling a business in 2017 that offer each side of the table a chance to come out ahead.
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