Print this page

Good Timing: Demographics and Personal Goals Effect When to Sell A Business
As seen in San Jose Business Journal
by Scott Holleran, Contributing Writer

There are as many reasons for selling a business as there are motives for going into business in the first place. But several factors should dominate the discussion, according to area business brokers.

And one of the biggest questions is: When to sell?

Sooner than later if you want to avoid the coming onslaught of aging baby boomers, according to Mike Sipe, president and CEO of San Jose-based brokerage firm Private Equities Development Inc.

"The vast majority of businesses are owned by people in their 50's," said the 45-year-old Mr. Sipe. "This [trend] is well-received in real estate and financial markets but, because most small companies are owned by aging baby boomers, we're going to see much more retirement."

Citing other common selling factors, including illness and lifestyle changes, Mr. Sipe said the coming wave of retiring small-business owners could reduce the value of an enterprise and produce a buyer's market.

"Prepare to sell it now," advised Mr. Sipe.

In the meantime, he said, buying and selling businesses just got tougher. A federal regulation, which took effect late last year, undermines what Mr. Sipe calls the "installment sale."

"If you take a promissory note [during the sale], now you must pay taxes immediately," he said. "Add to that the trickle-down effect of a tight labor market, and a tough sell may be around the corner."

"There are very few independent buyers, particularly in Silicon Valley," he said. "We used to see them by the hundreds, but it's radically different now."

"The job market is so strong it really cuts down on the available buyers. That makes it tougher for smaller companies to sell."
 

Michael Sipe is president of Private Equities, a middle market mergers and acquisitions firm. You can reach him on:408.295.4299 or at inquiry@private-equities.com.
 

Print this page