2012 has been a good year for my business and I believe 2013 will be better. Many things have changed and business owners must adapt to these changes quickly in order to survive and thrive. Small businesses have some advantages over larger entities as there are typically fewer decision makers as well as fewer moving parts and barriers to making changes.
What is my business?
I am a Main Street Business Broker, "A business broker is a person or firm who/which acts as an intermediary between sellers and buyers of small businesses". I help people buy or sell a small businesses like the ones you see on any towns Main Street, such as Restaurants, Day Care Centers, Beauty Salons, Gas Stations, Auto Mechanic Shops and so on.
Whats changing in my business? Lets take a quick look at the demographics.
America is aging and one of the largest demographic groups are aging baby boomers. This group of people were born between 1946 and 1964 and they are turning 65 years old at a rate of 10,000 per day and this will continue for the next 20 years! Close to half of Americas 22+ Million small business owners are in this group. Many are and will be retiring soon. This gives Business Brokers more Businesses to sell than the current number of trained practitioners could possibly handle.
On the Buyers side, the U-6 Unemployment Rate often referred to as the "Real Unemployment Rate" has remained stubbornly over 14% since Jan of 2009 (that's 20 Million people that need to make a living but for economic reason can't). There is a large pool of individuals with some capital that will become buyers for small businesses due to the fact that there are not enough good paying jobs for these folks to provide for themselves and their families. I refer to this as "buying a job" and why not own a small business, make a good living and have more control over your destiny. They also build equity in their businesses that they can cash in on when they eventually sell (repeat business for the Business Broker).
For these reasons and many others, Business Brokerage will be a growing service industry for many years to come.
Other interesting trends I am seeing in the small business marketplace.
Bartering or just giving discounts in return for discounts. I am seeing many business to business providers offering / asking for reciprocating discounts and exchanging services. I recently sold / brokered a Medical Clinic and was able to negotiate discounts on future Medical Services after reducing my fees. There are substantial savings to be had by both parties and the savings and tax benefits can add up quickly.
Another trend I am seeing is small business owners setting up additional entities (S-Corps) with separate Employer Identification Numbers (EIN). Many of the new federal regulations exempt small businesses based on the number of employees they have. The Individual Social Security Numbers tied to a businesses EIN is how the federal government tracks the number of employees each business has. Many business owners that have multiple locations under one entity are creating new entities for each location, (in example, a restaurant owner with 3 locations on one tax return is switching to three tax returns, one for each location). This reduces the size of and possibly exempts the smaller entities with fewer employees to many of the new regulations. THERE COULD BE SERIOUS TAX AND LEGAL IMPLICATIONS TO THIS AND YOU SHOULD CONSULT A CPA AND OR ATTORNEY BEFORE CHANGING YOUR BUSINESS ENTITY. Business owners are also setting up separate Management Companies and placing themselves and their managers as employees of these in order to provide benefit / compensation packages that are separate from the rest of their employees.
Expansions and contractions; several of the deals I completed this year were small businesses with revenue streams in diverse but related industries, The owners of these businesses decided to focus on their core competencies and sell off the parts of their business that could stand alone as a separate business. These are win win situations as a buyer winds up buying a small established business (buys themselves a good paying job) and the seller has some of their workload reduced and is flush with capital and time to expand their core business. At the same time, larger firms are seeking synergistic and opportunistic acquisitions and will look at these deal as well.
The bottom line.
We have had some very tough economic times and things are starting to get better, within every adversity there is opportunity. In my opinion, business broken down to its simplest terms is making money helping people get what they want / need in a more cost efficient / convenient way than the consumer could do on their own. If you look at your business in these terms, you can find ways to help people solve problems, and make a good living at the same time.
I would enjoy hearing your opinions on what is changing in your business and how your outlook is for 2013.
Vince LoCricchio
Broker@EnterpriseBrokers.com
About the Author, Vincenzo LoCricchio is the Broker Owner of Enterprise Brokers Inc. a Tampa based Business Brokerage Firm established in 2005. Prior to founding Enterprise Brokers, Inc. Vincenzo was in Business Brokerage and Franchise sales with various firms. Vincenzo is the current President of the Tampa Bay and Southwest Florida Chapters of the
Business Brokers of Florida BBF and also serves on the BBF State Board of Directors. The BBF is the largest state business brokerage association in the country and the second largest association of business brokers in the world.
