An ageing population of business owners and a generational shift in business succession strategies are leading to an unprecedented amount of opportunities for major investments, in the form of small to medium businesses coming the market. As our baby boomer generation continue to reach retirement age and exit the business sector, these already ample opportunities to successfully spot a business bargain and renovate that business will steadily rise.
According to renowned international business strategist and investor, Kerwin Rae, these key indicators point to what will nurture an increase in consumer spending across the segment and provide our country’s next great boom market.
“This will be the biggest boom sector we have seen in some time,” Rae stated.
“Approximately 22% of business owners are 60 or over, so the market is gaining strength and will only grow as the baby boomers continue to exit the sector.”
“With 2.1 million business nationally in 2011, we can estimate there will be 280,000 businesses for sale in the next five years, factoring in recent succession models.”
For the economy and business sectors, he expects the impacts to be multifaceted.
“I believe we’ll see an increase in spending on holidays and luxury items as these retirees look to spend up towards their retirement lifestyle and enjoy the fruits of their work life, rather than just leave it all as inheritance, ” said Rae.
“But we can also expect to see some gains across the short term investment markets, where they will want to hold some cash for returns towards further retirement spending.”
Similarly the business sector will be impacted on a range of fronts, not least an increase in activity from publicly listed companies with surplus funds who are looking for profitably managed businesses they can acquire.
“There will also be plenty of deals around for keen investors and ordinary people who can learn how to spot a bargain and successfully renovate a business. The amount of people who already do this is small, but unquestionably set to grow, and the real opportunity here is for people who know how to find and spot a bargain and essentially renovate the business to either flip or hold,” said Rae.
“This growth could come from a larger segment of investors from other classes such as property, who may not be able to find the deals that were once abundant in that sector.
“There are plenty of bargains on the market, but what’s needed is a change of focus from property to business, while using the same strategies and psychology used so successfully when buying, renovating and selling properties,” he added.
A recent Wholesale Investor survey found that only one percent of investors think that now is not a good time to invest, which Rae believes speaks volumes and indicates immense opportunities for investors looking to buy businesses.
“The Australian Association of Angel Investors (AAAI) tells us we saw $1.5Billion injected into Australian deals from angel investors in 2010, awhile the Australian Venture Capital Association Ltd (AVCAL) indicates $2.5B sitting in VC’s hands that is looking for a home in the form of business purchases or other cash producing assets,” Rae explained.
“The riskiest part of any business is the first three to five years, when most fail. So why consider starting a business when you can buy one that has survived this most volatile period, one that is already up and running?
“Considering on top of that the amount of angel and VC investment currently available in Australia and the fact it is becoming easier to access investor cash as banks tighten up lending, it makes for one tremendous opportunity for those who learn how to access or raise money and renovate businesses.”
Kerwin Rae is a businessman, coach, mentor, entrepreneur, author, survivor and international speaker. As one of the world’s leading business commentators and strategists for over a decade, he has coached thousands of consultants in numerous countries on business development, marketing, sales, human behaviour and entrepreneurial psychology. He has recently been appointed to the board of MBE Education.