Corporate Finance in Atlantic Canada

Commentary on corporate finance issues for small- & mid-market private companies in Atlantic Canada

Posts Tagged ‘baby boomer demographics

Business succession in NL

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https://soundcloud.com/vocm/sept-1st-greg-london-dan-jennings-of-bdo-valuing-your

On a recent VOCM radio show in NL (hosted by BDO partner Nancy Snedden), tax colleague Greg London and I talk in-depth about the challenges of business succession in NL.  We covered a wide variety of topics, such as demographics, taxes, the buyer landscape and more.

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Written by Dan Jennings

October 26, 2018 at 1:34 pm

Is now a good time to sell your business?

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As M&A advisors, we get asked this question a lot … “is now a good time to sell my business?”

The answer is yes … for example, the last two businesses we’ve sold in NS yielded an average of 9 offers each (signs of a very strong M&A market!).

But the timing still has to work for you and your family.  If you’re 50 years of age selling a small business, the market will typically not yield a high enough price to warrant you giving up the stream of profits from the business (unless you have other income-generating things you want to do after selling).  Of course, that assumes you don’t have health or other issues that could prevent you from operating the business for the next 10 years.

If, however, you are closer to retirement age and want to crystallize the value in your business, the market is very strong right now.  For quality small and mid-market businesses, we estimate there are at least 10 buyers for every seller.  That means a general rise in pricing, but also an improvement in terms (such as lower amounts of vendor financing).

Written by Dan Jennings

July 20, 2015 at 3:54 pm

The New Retirement – Starting a Small Business?

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http://sbinfocanada.about.com/b/2013/06/28/the-new-retirement-starting-a-small-business.htm

Interesting article on a survey of baby boomers by TD Bank.

“54 percent of boomers (those born between 1946 and 1964) have started or considered starting a small business prior to retirement … The top reasons boomers consider starting their own business before retiring were:

  • being their own boss (58%),
  • having the opportunity to make more money (53%),
  • and having a sense of personal achievement or pride (50%).”

If you are one of those boomers considering starting a small business, you might want to consider buying an existing one instead.  Check out our website for plenty of information on the entire process of buying a business.   http://www.raymondyuill.ca/buying.html 

Written by Dan Jennings

August 22, 2013 at 4:50 pm

US baby boomers are selling their small businesses

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https://www.exit-planning-institute.org/index.php?content=news&a=191

According to BizBuySell.com, the number of sales of US small businesses were up 56% in Q1 of 2013 (compared to Q1 of 2012).  One quote:

“We started getting a lot of activity with sellers who said, ‘I don’t want to go through another downturn or tough time.  I want to see if I could sell my business.'”

According to Pepperdine University, baby boomer retirement was the number one reason for small business sales in this period.

We haven’t seen this kind of huge spike in Atlantic Canada, but the number of transactions is definitely increasing, as sellers who paused over the recession impacts on their businesses have now come back to the market.

Written by Dan Jennings

June 7, 2013 at 9:54 am

NY Times: How the Sale of a Business Can Go Terribly Wrong

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http://boss.blogs.nytimes.com/2012/12/13/how-the-sale-of-a-business-can-go-terribly-wrong/

“The moral … be sure to hire advisers who have experience and are competent at what they do.  This is especially true when it comes to selling a business.  You can spend years building a business, but you generally get only one shot at selling it.” 

Interesting NY Times article on what can go wrong with the sale of a business.  From a US perspective, but still relevant in our market.

Written by Dan Jennings

January 31, 2013 at 10:01 am

Is now the “perfect” time to sell your business? It depends …

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http://www.theglobeandmail.com/globe-investor/investment-ideas/now-may-be-the-perfect-time-to-sell-your-business/article5661285/

This article in the Globe and Mail lists a number of reasons why this may be the “perfect” time to sell your private business, such as not having to ‘fight’ through another possible recession, being wary of the tax implications of selling and beating the ‘rush’ of baby boomer sellers who will be coming to market in the coming years.

While I don’t disagree with any of these reasons, and I also agree that the timing of your decision to sell is critical, I personally believe there are so many issues to consider that now may not be the ‘perfect’ time to sell for many entrepreneurs.  For example, the personal decision of what the entrepreneur will do with his/her free time after the sale can be terribly relevant to the sell decision … may not be relevant to a buyer’s pricing or purchasing decision, but it is very important to many sellers.  Also, the consolidating nature of your industry (or not) can mean the difference between a ‘fair’ price from financial buyers and a ‘super’ price from strategic buyers, so timing the decision to sell in your industry can trump all other factors (for some businesses).

There is one reality in today’s marketplace that is an important part of the decision to sell, and that is the fact there are many more potential buyers than sellers for quality, small and mid-market businesses in the Maritimes (in some cases, three times as many buyers).  ‘Quality’ can mean different things in different situations, but the overriding criteria are typically having a profitable track record and the ability to transition the existing owner/manager to a new buyer.  Since much of the art of selling a business is matching supply with demand, this over-balance of buy-side demand must be considered in any decision to sell.

As with all complex decisions, the answer as to if this is the ‘perfect’ time to sell is mult-faceted and often begins with “it depends” …

Written by Dan Jennings

January 31, 2013 at 9:37 am

New CFIB succession survey … and my thoughts

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http://www.cfib-fcei.ca/english/article/4640-passing-on-the-business-to-the-next-generation.html

The 2008-2009 recession prompted some baby boomer entrepreneurs to delay their retirement plans and stay in business longer than they had anticipated.  That’s according to a new report, Passing on the Business to the Next Generation based on survey data from the Canadian Federation of Independent Business (CFIB).  48% of SME business owners said they intend to exit the business in the next 5 years.

Now, surveys like this are not new … I remember seeing one in the early 90s basically saying the same things (no formal succession plan in place, need to sell the business to finance retirement in the next 5-10 years, etc).  However, this new CFIB one was done after the economic ‘dip’ in 2008-09, so it is relevant to consider.

In my own experience, the recent recession did cause a pause in entrepreneurial succession plans, but not only for the reasons identified in the survey.  The volatility in the public stock markets and concerns as to where to invest the sale proceeds have been real issues delaying some succession, in my experience.  Some entrepreneurs understand the returns they can achieve in their business, but are concerned when the stock markets overall in the last decade have failed to achieve even modest returns.

In addition, one of the challenges for small business owners is value/price — if the business is in an industry where there is no large strategic buyer consolidating and paying premium prices, many small businesses are valued by the local marketplace at 2-3 times cash flow, and this can be surprising to many entrepreneurs.  This surprise can mean some entrepreneurs believe they cannot ‘afford’ to sell yet.

Written by Dan Jennings

November 28, 2012 at 11:22 am