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Boomers Selling Businesses

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Friend got this email. Reminded me of why I'm not buying yet....

Everyday In The UK More Businesses Are Coming On The Market To Be Sold Than Ever Before - Is This An Opportunity Or Threat For Your Business?

Post WW2, there was a surge in the population which is now more commonly known as the Baby Boomer generation. Sixty five years on, these Baby Boomers have started to retire in massive numbers; this includes business owners who are now looking to sell their businesses.

However very few of these businesses will ever be sold because;

Typically less than 12% of all businesses for sale actually get sold, even in good times. The current economic situation will ensure even less will now.

There are more businesses for sale than ever before due to Baby Boomers retirement and this will drive prices down, simple law of supply & demand.

Banks are reluctant at best to lend to buyers and when they do the selling price is based upon the buyers’ credit rating not the value of the business.

It is now a buyers market as the glut of businesses means there are already more sellers than buyers.

The following generation, Generation X is smaller than Baby Boomers, are reluctant to buy and are less entrepreneurial. The next level, Generation Y will not be able to raise sufficient credit based upon their lack of experience.

Baby Boomers personal situation and attitude ensures many want to sell for heavily inflated prices as they need to top up their pensions etc.

Those adopting a traditional finance based approach to selling their business will fail or get very low returns. Selling a business is a Sales & Marketing exercise. You wouldn't let your accountant sell your services, so don't let him drive your biggest sale ever.

Even when there is a family member or other second generation coming through, statistics show most fail to maintain the business. Management buy outs are equally unsuccessful.

Lastly, and most critically, less than 5% of all business owners will have any exit strategy in place whatsoever and so the business they are selling is really just their job. Would you buy someone’s job?

Whether you want to sell your business or buy a business I can help you. As a top UK business coach since 2004, I have worked directly with over 200 business owners so have first hand experience to make sure the price is right for you.

If you are serious about either buying businesses or selling your own business please call me direct on xxx or email me back on xxx and we’ll arrange a complimentary meeting.

During our 60-90 min meeting we will:

Those Wanting To Sell

We will audit your business in 9 Core Areas to establish how saleable your business is right now and assess what areas need addressing to enhance your appeal to buyers. Equally we will pinpoint potential buyers for a pro active campaign to get you a higher price.

Those Wanting To Buy

There may be a glut of businesses for sale but getting the wrong one is very costly. To help you I will personally share my own checklist and rules for buying businesses that has been built up through buying multiple businesses myself, via clients and others that protects your investment, minimises the purchase price and ensures your sucess.

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This fits in with what I've been seeing. I get lists of businesses for sale and there are a lot of people 50+ selling. I suspect these people also know their businesses are not going to grow in the next few years so they're trying to get out but looking for peak prices. Sound familiar?Often they'll quote their accounts from 2007 or 2008, which will look good, but get the latest numbers and you can the businesses are suffering. Best keep your hands in your pockets for a while if you're thinking of buying a business (as for houses).

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Friend got this email. Reminded me of why I'm not buying yet....

Pretty much any small or sole proprietor business is worthless if the proprietor is planning to retire.

Only if it is large enough to have professional employeed managers is there a self sustaining asset. In which cas evaluation is purely on profit/income etc.

My take on this is that if you want to start a business wait a few years for asset prices to fall and these boomer owned business to have closed down, then do it.

Edited by Mikhail Liebenstein

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Friend got this email. Reminded me of why I'm not buying yet....

Indeed. Saw a nearby village shop up for sale as a going concern a few years ago, included the premises and owners flat above- asking was over £300k, all to be serviced and recouped via pints of milk, newspapers, fags and Battenburg cake. Nuts.

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I think some of those boomer businesses have only worked until now because many own the premises, bought years ago for very little. It's hard for a Gen X/Y entrepreneur to operate from a premises unless it's a margin-fest like a small coffee/sandwich place in a perfect area for that trade.

A photographer I knew ran a studio and it certainly won him more work as he could shoot straight away and offer a one-stop shop without separate hire fees but the overheads (mostly excessively high rent) of running his own space negated much of this advantage and a slow month would obviously be an instant drain.

It's funny how high fuel prices is seen as stifling economy activity but high property costs not. The problem is it's too cheap to hoard derelict commercial property. There's so much empty retail and office space around that it should be virtually free by now. But it's not.

Edited by CrashedOutAndBurned

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Indeed. Saw a nearby village shop up for sale as a going concern a few years ago, included the premises and owners flat above- asking was over £300k, all to be serviced and recouped via pints of milk, newspapers, fags and Battenburg cake. Nuts.

Cashew, macademia, dry roasted?

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It's only small businesses you can buy...

From my experience there are people buying jobs not businesses. These include most retail businesses (Cafes. Corner shops. Take aways)

These businesses typically make a loss if you do things proper and account for your own time as a cost. However most sellers and buyers of these businesses don't pay any/many taxes which is obviously illegal but the general perception is hmrc don't give a shit as enforcing the law would result in more than 90% of these businesses going bust and probably resulting in another 2m unemployed.

My general feeling on these are to stay away its not worth the risk/reward/investment. Worst is you will pay many tens of thousand and even into the hundreds for a business which makes legally nothing.

You can pick up the odd gem but that is a matter of luck. I sold one of my business for 6 months net profit + assets (for comparison FTSE companies typically trade at more than 20yrs profit) but I had to get rid quick as I had something more profitable starting v.soon

Overall buying a small business is a mugs game. Price are stupid due to tax scam accounting & valuation & the stupid fact that most sellers/buyers don't account for their own time as a cost

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It's only small businesses you can buy...

From my experience there are people buying jobs not businesses. These include most retail businesses (Cafes. Corner shops. Take aways)

These businesses typically make a loss if you do things proper and account for your own time as a cost. However most sellers and buyers of these businesses don't pay any/many taxes which is obviously illegal but the general perception is hmrc don't give a shit as enforcing the law would result in more than 90% of these businesses going bust and probably resulting in another 2m unemployed.

My general feeling on these are to stay away its not worth the risk/reward/investment. Worst is you will pay many tens of thousand and even into the hundreds for a business which makes legally nothing.

You can pick up the odd gem but that is a matter of luck. I sold one of my business for 6 months net profit + assets (for comparison FTSE companies typically trade at more than 20yrs profit) but I had to get rid quick as I had something more profitable starting v.soon

Overall buying a small business is a mugs game. Price are stupid due to tax scam accounting & valuation & the stupid fact that most sellers/buyers don't account for their own time as a cost

I'd agree entirely.

I would be keen to set up a business, but to be honest I'd need to make £300k a year profit as a minimum to make it worth my while and cover the risk capital.

Most of the business above wouldn't cut the mustard.

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It's only small businesses you can buy...

From my experience there are people buying jobs not businesses. These include most retail businesses (Cafes. Corner shops. Take aways)

I can give you an example of a tearoom that we have viewed and will watch go to auction on the Nov 24th (lot 6-guide price £250,000 - £300,000). The auction valuation is still very top-heavy, for a business that relies on the ten week tourism trap. They have depressing trading accounts and even if they reach the guide price(I doubt) have been working for very little or at a loss for the last six years.

We live in crazy times, when you look at the valuation within two years.

20 Main Street, Solva, HAVERFORDWEST SA62 6UU

Property History

Date

06/05/2005

Property Sold For £350,000

10/01/2003

Property Sold For £60,000

Other bug bears of mine:-

When you speak to the vendors of a business, they gave the usual tap of the nose and say "I have little book with the true accounts, You don't want to bother with the certified accounts".

Oh its a lifestyle business it needs a fresh pair of hands- yeah right!, why would anyone work 60 plus hours a week for no return.

The vendor wants you view before you see the accounts - Why would we want to travel 300 miles to view, if we can't afford.

We sat outside one business for two hours and watch two separate customers go in within that period. At the viewing the owner first response after introductions "oh! you should have been here 20 mins ago, we were packed out". Pity his till receipt backed our findings, he still claimed " I don't put it all through the tills" Rant over. :)

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Pretty much any small or sole proprietor business is worthless if the proprietor is planning to retire.

Only if it is large enough to have professional employeed managers is there a self sustaining asset. In which cas evaluation is purely on profit/income etc.

A sweeping generalisation, of course. A customer base and a bit of good will is worth something.

Example: when I moved here I found a barber I liked. He was getting on in years and sold up his business, which had assets of premises and a customer base.

My take on this is that if you want to start a business wait a few years for asset prices to fall and these boomer owned business to have closed down, then do it.

If you have the right business idea for now, start it now! If you don't, then don't. But I wouldn't try too hard to time it: you could waste a life that way.

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I think some of those boomer businesses have only worked until now because many own the premises, bought years ago for very little. It's hard for a Gen X/Y entrepreneur to operate from a premises unless it's a margin-fest.

A photographer I knew ran a studio and it certainly won him more work as he could shoot straight away and offer a one-stop shop without separate hire fees but the overheads (mostly excessively high rent) of running his own space negated much of this advantage and a slow month would obviously be an instant drain.

It's funny how high fuel prices is seen as stifling economy activity but high property costs not.

Spot on.

I gave up running my business from physical premises - a slow month or two and it was down to the wire. If your business type allows it, scrap physical locations and run it with home-based staff and a virtual office service.

High commercial rents and long leases are a killer for small businesses with the current market volatility. It's the purist form of rentier capitalism out there and a perfect example of how asset inflation is put ahead of labour and real wealth creating industries in today's economy. If the economy is doing well and your business is booming, what happens? The rents go up and all that extra profit gets gobbled up by the landowners instead of reinvestment to your business or extra staff.

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Indeed. Saw a nearby village shop up for sale as a going concern a few years ago, included the premises and owners flat above- asking was over £300k, all to be serviced and recouped via pints of milk, newspapers, fags and Battenburg cake. Nuts.

A few years back I was seriously tempted by a village post office with flat above. The asking price was in line with the market for the flat alone, so the ground floor was effectively a business premises at no additional up-front cost. Not an easy place to run a consumer-facing business like a post office or shop, but as an alternative to renting it out to someone running a small business I'd've had a use for it as my own office, thus freeing up more living space in the flat.

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A few years back I was seriously tempted by a village post office with flat above. The asking price was in line with the market for the flat alone, so the ground floor was effectively a business premises at no additional up-front cost. Not an easy place to run a consumer-facing business like a post office or shop, but as an alternative to renting it out to someone running a small business I'd've had a use for it as my own office, thus freeing up more living space in the flat.

On that basis it would make sense of course, but for many it doesn't work out like that. Inflated house price+ inflated business price = no chance.

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It's only small businesses you can buy...

On the contrary, big businesses are usually the easiest to buy, to the extent of your means. Anyone can buy Tesco, Vodafone, Unilever, Barclays, et al. The big business you can't buy (like Coop, John Lewis, Nationwide) are the exceptions in most fields. Except accountants, solicitors, and public sector.

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I know a few London types that might possibly loose their jobs soon...they are are saying..."We will start a coffee shop..."

I see no flaw in their plan.

They won't do it & if they actually try expect a 50-150k loss

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I know a few London types that might possibly loose their jobs soon...they are are saying..."We will start a coffee shop..."

I see no flaw in their plan.

I actually know a couple who did this and it was such hard work for them. They kept hiring people to work for them but found it nigh on impossible to find either trustworthy people or people who actually turned up for work.

Interestingly, I have noticed a few new coffee houses opening in Swansea of late.

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I actually know a couple who did this and it was such hard work for them. They kept hiring people to work for them but found it nigh on impossible to find either trustworthy people or people who actually turned up for work.

Interestingly, I have noticed a few new coffee houses opening in Swansea of late.

....and let me guess the wages that they paid were .... ?

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I get loads of emails selling business, most are only valuable because of the owner - however it gives me good ideas as I'd loved to start a business.

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....and let me guess the wages that they paid were .... ?

That's just conventional wisdom/cliche.

Honesty/integrity aren't a function of hourly rate - you'll find no shortage of people who'll take £20/hour for a job that involves doing naff all, and still help themselves to any cash that passes through their hands and not bother to turn up on time if they think no-one will notice.

________

I just would not consider starting a customer facing bricks and mortar business, unless it was in some very particular niche and I could buy the freehold outright for cash.

I'd even have to think hard about something like a pound shop on a rent free rates/service charge only deal.

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I get loads of emails selling business, most are only valuable because of the owner - however it gives me good ideas as I'd loved to start a business.

I sometimes get spam (most usually by phone - my email is better-filtered) from people asking if I want to sell my business.

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The following generation, Generation X is smaller than Baby Boomers, are reluctant to buy and are less entrepreneurial. The next level, Generation Y will not be able to raise sufficient credit based upon their lack of experience.

I see reluctant being swapped with does not have the opportunity to be.....

I have looked a at lot of small businesses and anything with a property component is hit with the same problems as residential property....the sums dont add up.

I see a lot of people being "entrepreneurial" but they have no choice but to freelance/form freelance groups rather than take on the expense of staff and or a property.

There are too many landlords involved in small business property, an owner can work for next to nothing during the bad times but with the additional hand to feed of a landlord its just that step too far....longer term it would be better for many units to be owner occupied again.

I have been recently looking at retail units for a project, there are not shortage of such units sitting empty but the business rates seem from a bygone age when the previous company could turnover millions from such units now those days are gone lower turnover businesses such as independent stores/gyms/play areas could use those spaces but the rates price them out.

maybe it would be better to have a rent based tax which can go up and down with the market?

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I see a lot of people being "entrepreneurial" but they have no choice but to freelance/form freelance groups rather than take on the expense of staff and or a property.

Exactly this. Say I have a small business. If I need a skill I do not have I either: learn it or get a freelancer to do it. My website is my shop front so no high street presence required. If I sell something - I might pay a company like Amazon to store/fulfill any orders. It's increasingly unlikely I'd want to fabricate something with my own team - so I could outsource that too and get them to ship direct to my fulfillment company. In this scenario - why would I need a property or staff?

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  • 284 Brexit, House prices and Summer 2020

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      • down 5% +
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