Another Year On!
With the start of a new year we reflect on the year that has been and prepare for what we all hope will be a positive and fun 2015. I am certainly one of this group. Most of us like to think that since the GSF (Global Financial Crisis) we are all now heading into more positive buoyant times. There is an old adage however that says if we continue to have the same strategies that we have in the past, then we shouldn’t be surprised when the results are the same as we have experienced in the past. Consider for a minute the following information.
The average age of a family business owner in 2013 was 58. In 2010 the average age was 55. Without the benefit of actual current data, let’s assume that this trend is continuing. Based on that assumption this year the average age will continue to rise to 60, and by 2020 it will be 65. That is the average age, meaning that many business owners will in fact be considerably older than this.
Now let’s consider a second statistic. 64% of these business owners in 2013 would seriously consider selling if approached. That number is up from 61% in 2010. Again without the benefit of actual current data, let’s assume that this trend is continuing. So this year 66% would consider selling if approached and by 2020 this number would rise to 71%.
This year (2015) the average age of a family business owner is likely to be 60 and 66% of them would consider selling their businesses if approached! This number alone without the continuing trend into the future point to a looming crisis. At some point many of these businesses will hit the market. The laws of supply and demand suggest that with increased supply and no corresponding increase in demand, there will be downward pressure on prices. Family business owners are likely to receive less for their businesses when they do chose to sell. In times like these only businesses that are genuinely valuable will sell for a good price.
The only way out of this is to either not sell and load the responsibility of running these businesses onto our kids, or take action now to ensure that our businesses are indeed genuinely valuable. In many cases you will need help to make your business or professional practice genuinely valuable.