Do you plan on selling your business soon?

A recent UBS study found that: “Forty-one percent of business owners expect to leave their business in the next five years. Over half of these owners (52%) plan to sell, not only because many are approaching retirement age, but because timing may boost their chances of securing a favorable sale price.”

If you’re looking for potential buyers, consider marketing your business to Millennials.

Who Are Millennials?

BankRate explains that: “Millennials (individuals born between 1981 and 1998) are characteristically known as the largest, best-educated and most diverse generation in U.S. history. There are currently 83.2 million Millennials.”

Most importantly, this group is rapidly building wealth.

A 2017 UBS white paper, Millennials – The Global Guardians of Capital, states that: “Those born between 1982 and 1998 already account for 27% of the global population. Today they hold $17 trillion of the world’s private wealth, and by 2020, that could rise as high as $24 trillion — or roughly 1.5 times the US’s national output in 2015.”

While some Millennials may have the financial means to buy a business, this group is more concerned about risk than prior generations.

UBS also points out that: “77% of Millennials think becoming a business owner is too risky, compared to 55% of Gen Xers and 43% of Boomers. Millennials also feel that the stress level of owning a business is too high (83%).”

The article further explains that the tech stock declines in 2000 and the Great Recession of 2008 impacted Millennials’ views of risk. Many take a more conservative approach and aren’t willing to become entrepreneurs.

Other Millennials, however, are attracted to the idea of owning a business.

Why Your Business Is Valuable

Here are some business traits that a Millennial buyer may value:

  • Competitive differentiation and uniqueness in the market
  • Track record of sales, positive cash inflows, and net profits
  • Recurring revenue streams with automatic customers

A business with a proven track record may be an attractive investment option for a Millennial. This group is more focused on savings and investment, but is hesitant to invest in traditional stock and bond portfolios. Operating your business may seem like a better wealth-producing option for some Millennials.

The key is to market your business effectively, using the services of a business broker.

Using A Business Broker

A business broker’s role is to maximize the sale price you receive and to eliminate barriers that may hold up a potential business sale. Here are some specific tasks performed by business brokers:

  • Understand the seller’s motivations, and to address any issues that may delay or prevent a sale.
  • Prescreens buyers to determine if they have sufficient financing to purchase the business.
  • Use metrics and online valuation tools to determine the business price. Analyze the sales of similar companies, industry trends, and market factors.
  • Manage the due diligence process, so that documents are provided and reviewed in a timely manner.

A broker negotiates the final sale price on your behalf and will ensure that all of the necessary documents are signed at closing. Brokers can also address any laws, regulations, permits, or licenses required for the transaction.

Your broker will put together marketing materials to promote your company to potential buyers, including Millennials. An experienced broker can make a compelling case to a purchaser, which increases the likelihood of a sale.

A business sale is a lengthy process, and your broker must understand the Millennial mindset.

How Millennials Negotiate

Harvard Law School recently commented on negotiating with Millennials:

  • This generation of workers is a highly motivated, creative, and fast-thinking group.
  • In negotiations, focus on being open and clear in your communications.
  • When you propose an idea, take some time to describe the reasoning behind your thinking. This approach will bolster the legitimacy of your decisions and convey the respect that Millennials require.

Once you know how to negotiate, you can tailor your marketing efforts to the Millennial market.

What To Do Next

Find a business broker who has experience with Millennial buyers.

When you talk with brokers, ask them about their recent transactions, and the number of sales they’ve closed with Millennials. Find out how they marketed each business to this target market, and ask about the obstacles that the seller had to overcome.

Marketing And Training

Successful brokers can produce marketing materials that attract Millennials. They understand the unique challenges of selling to this market.

If you’ve developed a profitable niche that is repeatable and teachable, you can easily train the buyer to use your system. If the buyer can visualize a smooth transition with effective training, you’re more likely to close a sale.

A successful transition to the new owner requires clear communication.

Management Issues

If a Millennial is buying a firm that is staffed by older managers, the broker and the seller need to address this issue.

Are the managers willing to stay and work for someone who may be younger? If managers decide to stay, will they accept direction from a Millennial owner?

The seller, buyer, and company management have to be on the same page, or the transition to the new owner will be difficult.

Finally, it’s important to understand how the buyer views the business purchase.

Financial Buyers Vs. Strategic Buyers

Important Questions To Ask Your Business Broker 2

Financial buyers achieve a return on investment by following these steps:

  • Evaluate and purchase: Find a company that generates an attractive level of earnings and cash flows.
  • Manage: Operate the business and generate earnings, which are used to recover the cost of the investment. Once the entire investment cost has been recovered, the buyer will start to earn a positive return on the purchase.
  • Exit opportunity: Sell the business to another firm that is interested in the track record of earnings and cash flows. An eventual sale generates the biggest return for the investor. The exit may be an initial public offering, or another private sale.

Strategic buyers, on the other hand, purchase companies in order to grow an existing revenue source, or to diversify into new products and markets.

Strategic Buyers

Strategic buyers have a long-term focus and are willing to make substantial changes to the acquired firm over time. The seller may be a competitor, a supplier, or a large customer. A strategic buyer is willing to pay a premium for a business that can help the combined firm increase profits.

Business expansion can take several forms:

  • Vertical expansion: The seller’s business allows the buyer to control another step in the delivery of a product or service. If a sporting goods manufacturer buys a company that supplies leather material, the purchase is a vertical expansion strategy.
  • Horizontal expansion: If you expand horizontally, you add new products, or sell products in new markets. If a sporting goods company purchases warehouses to store and market goods in a new geographic region, the expansion is horizontal.

Understanding the buyer’s goals can help you position your business for a successful sale.

The professionals at Raincatcher have years of experience advising business owners and have worked with a number of Millenials to help them buy businesses. They understand your industry, and how you are positioned in the market. Raincatcher’s staff will assess the buyer’s interest, and determine if the purchase is strategic or financial.

When you hire an expert, you can make a more informed decision about your business sale. Work with Raincatcher, to sell your business and gain peace of mind.