Most Business Owners Plan to Sell Within Three Years

A seller's market and aging baby-boomer population is causing many entrepreneurs to consider exiting.

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With millions of baby boomers approaching retirement age, 80% of business owners in the U.S. are now considering selling their firms, according to a new survey.

Of the owners that are considering selling, 75% anticipate doing so within the next three years. The survey, which was conducted by the University of Dallas School of Management and GW Equity, questioned more than 200 owners of businesses with revenue between $1 million and $150 million.

Many business owners wait until retirement to sell, and as baby boomers are getting older, the numbers of businesses for sale is rising. In fact, 57% of business owners identified their age as the main motivation for considering a sale.

“There’s a whole generation of owners looking for a way to turn their business entities into cash,” said Gene Sartin, executive vice president at GW Equity, a Dallas-based investment banking firm.

Fortunately for business owners, the market is ripe. Thomson Financial, a New York-based financial-services company, reports strong global merger-and-acquisition activity. The first quarter of 2006 saw a 45% jump in worldwide deal volume from a year earlier, with more than a third of that $880 billion taking place in the U.S.

The survey found that 82% of business owners have been approached to sell their businesses.

“Mergers and acquisitions is a cyclical industry, and we're in one of the largest sellers' markets that has ever occurred,” Sartin said. The current combination of low interest rates and favorable capital gains taxes is making it easier to acquire than grow organically, which means buyers are eager, he added.

Michael Minnig of Sunbelt Capital Group brokers deals for companies with revenue in the $750,000 to $5 million range, and said that capital gains and relatively low interest rates make it a good time to sell. Minnig sold his own beer distribution business eight years ago. “The market was pretty good then,” he said. “But now we’re definitely in a sellers’ market.”

Sartin noted that business owners tend to procrastinate during the good cycles. Of survey respondents that had been approached but decided not to sell, 35% held off because they anticipated continued growth. “What the majority of business owners don’t realize is that you can’t outgrow interest rates, and you can’t outgrow capital gains,” he added. “The time to sell is when the market is flush with cash, and the market is flush with cash right now.”