There are millions of Baby Boomers approaching retirement and many of them own niche blue-collar businesses that face no institutional competition, are essential, and are cash cows with recurring revenue.
As such, all of private equity is salivating for the opportunity to seize these profits.
This article is intended to be a warning and factual guide on how to navigate this situation.
The market for small businesses is very illiquid; there are few transactions and 70% of businesses that list for sale go unsold.
This results in a buyer’s market where companies that are sold are sold cheap.
Companies earning $200k - $1 million are sold for three to five times their profits.
Companies earning $4 million are sold for at least eight times their profits.
Your business will likely survive for decades so the market price does not reflect the true value of your company. But if you are willing to accept what the market is offering, the best move is to connect with similar business owners, combine your companies so the profit increases, and sell for more.
As mentioned, a business making $4 million will sell easily for $32 million. However, there are conditions.
High multiples (8–9x) go to companies that:
This is not a recommendation to sell. An internal succession plan can be just as good, if not better, for you.