A huge number of small businesses are changing hands these days, and that momentum isn't likely to slow down anytime soon. In a crowded business-for-sale marketplace, it's important to examine not only who's on either side of these transactions, but also why they're buying or selling. BizBuySell recently addressed these questions in a survey of prospective U.S. small business sellers and buyers.
While the business sellers surveyed represent an increasingly diverse group, most aren't new to the game. Of the 1,700 surveyed sellers, 58 percent had owned a business previously. One-fifth of these "serial entrepreneurs" value their business at over $1 million, compared to 13% of first-time sellers. But even if they make a big sale, serial entrepreneurs are three times less likely than first-time sellers to leave the entrepreneurial game for full-time employment. This may be because they have business ownership in their DNA: 60 percent of serial entrepreneurs had a parent or grandparent who was a small business owner.
Business sellers have various motives for selling, and these reasons differ based on age, gender and ethnicity. For younger sellers, burnout is a significant issue, with 30 percent of 30-somethings and 26 percent of 40-somethings citing it as their reason for selling. By contrast, sellers in their 50s and 60s - who comprise 54 percent of respondents - report much lower burnout rates, and are instead looking to sell as they near retirement age. But though retirement is listed as the top motivator for selling, that finding needs to be qualified. While 40 percent of sellers identified retirement as their reason for selling, only half of this group (48 percent) intend to retire in earnest, while a full quarter are planning to channel their energy into another venture.
When it comes to the gender breakdown, women and men have different motives for selling - and different levels of readiness. As the survey found, 42 percent of female sellers are prepared to sell their businesses right now, compared to only 26 percent of men. For women, there's perhaps a greater sense of urgency to sell, since they report burnout (25 percent) and health issues (14 percent) at a higher rate than male respondents (19 and 6 percent, respectively). Therefore, it's not surprising that only 13 percent of female sellers said they'd buy a business after selling. Male sellers, on the other hand, are more likely to remain active in the business realm, with 32 percent planning to buy another business.
In addition to age and gender-related differences, motives for selling vary along ethnic lines as well. While retirement is a significant motivator for Caucasians (46 percent), it's a much smaller reason for African American (22 percent) and Hispanic/Latino & Asian/Pacific Islanders (20 percent). Among these minority sellers, the vast majority do not plan to truly retire upon selling their business, and instead will either buy another business or return to the workforce. The intention to return to the workforce is particularly high among Hispanic/Latino sellers, at 18 percent.
As the BizBuySell report found, sellers are a diverse bunch of people with a variety of motives for selling. Today's small business buyers represent a similarly eclectic group. In the next part of this series, we'll look into who these prospective buyers are and what they want in a for-sale business.