In a 2010 survey of small and mid-size business owners, PriceWaterhouseCoopers found that more than half of the owners of privately held businesses are thinking about selling within the next five years. Here some survey highlights and notable findings:
1. 60% percent of the owners of privately held small businesses say they will monetize via a sale within a reasonably short time.
- IBG’s Perspective: We find this concerning, as it will lead to a significant increase in the number of companies for sale, flooding the market and lowering the worth of companies as reflected in business valuations.
2. The primary reason cited for the interest in selling? A desire to “diversify their own net worth and create liquidity.”
- IBG’s Perspective: Private business owners generally have the majority of their net worth tied up in their businesses…which puts them at a very high level of risk when it comes to retaining value.
3. Far more executives of small firms than large firms cite “retirement” as a primary reason to sell – 59% compared to 11%.
- IBG’s Perspective: This doesn’t come as a surprise, considering that more than 60% of businesses in the United States are owned by baby boomers.
This study provides warnings and insights that are extremely relevant to private business owners. With the tax increases scheduled to take effect in 2013 and a looming oversupply of businesses for sale due to retiring baby boomer owners, not only are business values likely to decline, but net profits after tax will also be negatively impacted.
On top of that, the S.B.A. has said that a business owner who does not properly prepare a business for a sale can end up leaving on the table an additional 35% of its value. If you want to sell within the next five years, like those cited in this study, it is very much to your advantage to start planning sooner rather than later.
If you would like to discuss any of the PriceWaterhouseCoopers survey conclusions or explore how this information directly applies to you, please contact IBG Business Services by phone at (303)758-4000 or by replying to this email.