Baby boomers, a generation of people often defined as being born between 1946 to 1964, are getting close to retirement, which will result in widespread business acquisition opportunities. To be more precise, around 12 million privately-owned businesses may be available to buy in the coming years as the boomers look to cash in.
This opportunity will not be overlooked by ambitious entrepreneurs who are already realizing that they are not only buying a successful business but can also benefit from the experience and market knowledge of the seller. Departing business owners will look to ensure that their life’s work is placed in a safe pair of hands and will likely be willing to offer expert guidance to the new owners – one of many benefits.
This article will discuss this new market opportunity and why entrepreneurs should buy businesses from retirees instead of purchasing a less-established company or setting up their own business. In addition, we will also provide some helpful tips on how to find such an opportunity and complete a purchase.
The Benefits of Buying an Existing Business From a Retiree
Many business owners close to retirement age are considering their exit plans and how to recoup as much money as possible to enjoy their later years. However, the cost of buying a business from a retiree can still be much lower than starting a business from scratch or buying one that is relatively new and on the up.
There are several advantages to buying a well-established business. One of the key benefits is the little-to-no startup time of buying a recognized brand, its customer base, and possibly a well-trained workforce. This solid base can also make it much easier to secure financing from lenders if you want to grow the company quickly.
But let’s not forget the value of the person you are purchasing the business from. Their decades of experience and know-how can be tapped into to allow you to hit the ground running. Many retirees may not be looking to down tools immediately and could be open to sticking around in a consultancy role, giving invaluable advice and ensuring a smooth transition.
In summary, the key benefits of buying an established business from a retiree include the following:
- Potentially a lower investment than starting your own business or purchasing a startup.
- You are buying an established brand and customer base.
- The business may already have a trained workforce in place.
- Financing may be easier to secure.
- You can tap into the previous owner’s experience and industry knowledge.
How Baby Boomers Are Giving Back to Younger Entrepreneurs
During the transition from being a full-time business owner to a retiree, many baby boomers will be more than willing to give a little back to the businessmen and women of the future. Many people selling their businesses will still hold a lot of influence in their respective industries and may still wish to be involved in an advisory capacity. Some retirees may even join regulatory committees on a part-time basis, remaining important figures that earn instant respect and influence others.
Retirement does not mean a person no longer seeks new challenges, with some people taking up new roles within the community or lending their skills to charities and worthy causes. The experience and connections of baby boomer entrepreneurs cannot be underestimated, and younger generations can benefit greatly from their mentorship, support, and guidance.
Since most experts recommend investing 10-15% of your income for a healthy retirement, many retiring businessmen may also be on the lookout for new financial opportunities, such as investing in growing businesses. Data shows that baby boomers are around 9 times wealthier than millennials, meaning they are in a much stronger position to make speculative investments. Therefore, young entrepreneurs looking for additional financing should consider tapping into this demographic for a mutually beneficial partnership.
In a less impactful way, retirees will also support new and existing businesses as valued customers. Whether looking to invest in property, travel the country, or just spend their money with local businesses, they represent a significant part of the national and global economy.
8 Steps to Buying a Business From a Retiree
When buying any business, you must do your due diligence to determine whether the company is the right fit for you and can be purchased for a competitive price. This is why we have put together a short eight-step guide to help you through the process.
1. Conduct Extensive Research
Many factors need to be given deep thought before any purchasing decisions can be made. These include three key questions:
- What type of business are you looking to buy?
- Does it tie in with your existing businesses and experience?
- What can you bring to the business to help it grow?
Knowing the industry is also crucial if your new business venture is to succeed, so research every market area to understand the niche and what competition you may face. One way of getting a foothold in the industry is by attending trade shows and conferences and speaking with people who have spent years working in the field and your potential customers.
2. Build Connections
Following on from attending industry events, it is a good idea to build connections that may point you in the right direction of businesses that may be available for purchase. News travels fast if a person is looking to retire. Speaking to people with their fingers on the pulse can help you stay one step ahead, giving you the opportunity to make an offer before the business reaches an online business marketplace or an auction.
Business advisors, brokers, accountants, and lawyers linked to your chosen industry can all be invaluable sources of knowledge.
3. Do Your Due Diligence
Before a deal can be concluded, it is vital that you know exactly what you are buying by conducting due diligence and following the “paper trail.” Therefore, you must request all business records and accounts to identify potential issues, such as scheduled tax audits, insurance disputes, pending litigations, existing liens, etc.
For corporations and LLCs, you should also check the operating agreement and bylaws and review the Certificate of Good Standing. Of course, this can be a complicated and painstaking process, so hiring experienced advisors to assist you is recommended.
4. Analyse Competitors
Buying a business without knowing the competition is a recipe for disaster, especially if the company is based in an area heavily saturated with rivals offering the same services or products. Entering into a highly competitive market while being new to the industry presents considerable risk, and it may be sensible to pursue other opportunities instead.
As well as your potential competitors, it may be a good idea to get in touch with a few existing customers to determine why they use the services of this company and what makes it stand out from the crowd.
5. Think About the Future
You may have discovered a company that is available at a great price and ticks numerous boxes in terms of being free of debt, having a strong customer base and no real competition. However, you also need to ask yourself, what can you bring to the company? And how can you push it forward and achieve growth?
Before you sign on the dotted line, take the time to create a viable plan regarding your ideas to take the business in a new direction and how you can generate profits.
6. Why Should They Sell to You?
Many business owners who have put decades into making their businesses successful are reluctant to sell to private equity firms that will look at their hard work as just another asset. This gives young entrepreneurs a chance to convey why they are a much better option and have the same drive, values, and ambitions as the departing owner once had.
It may sound sentimental, but when a business has been a person’s life for 20, 30, or maybe 40 years, they likely want to ensure it goes to a safe pair of hands who will treat it with love and respect.
7. You May Need To Be Patient
Even after the contracts have been signed, the time between that sign-off and completion could still take a while. During this time, you need to just relax and maintain regular communication with relevant parties to be up-to-date with any new developments or hold-ups. Processes such as the issuance of new tax numbers, employer identification numbers, and business licenses can all add to the timescale.
8. Draft a 100-Day Plan
New business leaders are advised to draft a 100-day plan, a structured approach to how they will succeed in the first 100 days of their new business venture. This plan can act as a guideline or checklist to help you get your feet firmly under the table and build a platform to take the company to the next level.
When developing your plan, it is recommended to consider the following factors:
- Your role within the company and what is expected of you
- What resources are available
- How you will engage with your customers
- Building supplier relationships
- Developing core KPIs
- Identifying new opportunities
- Assessing the current workforce
- Annual goals and a long-term strategy
Buying a business from a retiree can be extremely advantageous compared to setting up a new business from scratch or investing in a recently launched and unestablished company. Benefits include an already loyal customer base, an established brand, access to financing, and the wealth of experience and expertise the departing owner may provide.
However, like any business acquisition, research, due diligence, and market analysis are required to determine whether this is the right opportunity for you. Fortunately, with patience and the right connections, buying a company from a retiring baby boomer could be the best business move you will ever make.
Find Out How Much Your Online Business is Worth
Flippa’s intelligent valuations engine is the industry’s most accurate tool, taking into consideration thousands of sales and live buyer demand. Find out what your business is worth with our free valuation tool and plan your next move.