The baby-boomer generation are increasingly buying businesses as they near or hit retirement age, according to a BusinessesForSale.com survey.
Of those using the market-leading classifieds website to browse for businesses to buy, more than one in four (27%) are aged 55 and over.
Nearly two thirds (62%) of business buyers are in the 35-54 age range, while a third (33%) is between 45 and 54. Buying businesses is rare in the 18-25 age bracket, which accounts for only 3% of those using BusinessesForSale.com. The average age of a business buyer is 44.2.
Jeremy Mandell, Head of Marketing at Dynamis, which runs the website behind the survey, FranchiseSales.co.uk, says: "Far from retiring quietly, many baby boomers still want to work, but want a change of direction.
"However, many just want somewhere to invest their savings as they wind down to retirement. Many of the post-war generation now in their late 50s and 60s see buying a business with a proven track record as a safer investment than shares or pension funds. An established business can be a reliable income generator that a manager can run day to day on their behalf."
Many of the post-war generation now in their late 50s and 60s see buying a business with a proven track record as a safer investment than shares or pension funds
Jeremy Mandell, Dynamis head of marketing
One survey respondent in the 55-plus age group said he was "looking for a business to run part-time to help fund my retirement." Another said he wanted "something to occupy my time during semi-retirement."
Buying a business is also a safer investment than starting an enterprise yourself given four in five start-ups fail to reach their fifth birthday. Says Mandell: "You could argue that a young entrepreneur, with most of his working life ahead of him, will have plenty of time to mould his own business from scratch - and time to make mistakes, time to fail. An older entrepreneur in the twilight of their career will have less patience for the start-up phase and will not want what is likely to be their final career move to fail."
Baby boomers are also cash- and asset-rich; the wealth gap between the young and older generations is as wide as it's ever been. The average budget of prospective buyers below 45 years of age is 55% of that of those aged over 45, £144,000 against £260,000.
However, there's another, more prosaic explanation for the prominence of over 55s in the businesses-for-sale market: there are simply more of them in the population at large. We're an ageing population, an accelerating process now that the baby boomers are approaching or have reached retirement age.
A desire for liberation from the control of an employer was cited as the main motivation for buying a business half as frequently among the over 55s as the under 55s, 16% compared to 33%. Mandell has a theory why gaining independence is less compelling to baby boomers scouring the business market:
"If you're a strongly entrepreneurial person who chafes under the yoke of employment, then you're unlikely to withstand it for very long - certainly not until you're in your 60s. Those with a burning desire to be their own boss perhaps tend to go into business much earlier their career."
Selling a business
As many comments among survey respondents suggest, the primary motivator is instead a reliable income as they head into retirement. And yet, retirement is an increasingly common factor behind business sales. Retirement was cited by 58% of business brokers and transfer agents around the world as the most common or second most common reason for businesses being put on the market.
It was the second most common reason given in the seller survey, cited by 24% of respondents, while the most common reason with 32% was to move onto another business opportunity. A further 10% cited ill health. A desire to relocate geographically polled 24%.
Retirement could conceivably become the most common factor as more boomers reach their mid 60s, resulting in a flood of new businesses on the market, which will apply downward pressure to prices.
However, a surge in retirement sales also represents a countervailing factor affecting prices, as Mandell explains: "A business being sold because of retirement will invariably be a more successful, robust business than one sold because the owner has realised he's not suited to the industry or performance has been disappointing (cited by 7% of respondents).
"As time goes on then, and more baby boomers look to exit, expect a deluge of mature businesses with solid customer bases and good reputations - and these will command high prices. Those simply selling to buy another business or looking to exit because the business is struggling are generally more impatient to sell and therefore more flexible on price."
Forty-six percent of US business buyers have bought businesses before, compared to 37% of UK buyers, suggesting it is more common in the US to own more than one business at once and offering further evidence of the Americans' vaunted entrepreneurial culture.
However, the average age of the US buyer is higher, 48 against 44.8 in the UK. There is almost twice the proportion of 26-34 year olds buying businesses in the UK as in the US, 13% compared to 7%.
Younger buyers are much more likely to buy technology businesses, with 19% of 18-34 year olds choosing technology and internet businesses as their preferred industry compared to 9% of over 45s.
Versus franchise buyers
The average age of prospective buyers is nearly three years older than that of the average franchise seeker, 44.2 against 41.5.
Jeremy Mandell believes "there are two overarching reasons why franchise seekers are, on average, younger. Firstly, money: with less cash and fewer assets, younger people struggle to afford the higher costs associated with buying a regular business. On average, a franchise seeker's budget of £79,500 is about a third of that of a business buyer's, standing at £208,000."
"Secondly, the experience factor: whereas nearly 60% of buyers of non-franchised businesses said experience in the sector was the primary reason for choosing an industry, many - though not all - franchises do not require franchisees to have any experience in their sector. In many cases, it's positively desirable for them to have no experience."
One BusinessesForSale.com user continued in her role as head of a council department after buying a hair salon, employing a manager to run the business day to day. The 39-year-old admits it will be "a few years" before she can live off the profits of the hair salon alone but ultimately expects it to fund an early semi-retirement. "I kind of had a five-year plan really. I don't want to be doing my job forever as it is very stressful and I've done it for 20 years already."
The majority of business buyers, 81%, are male. This figure tends to be lower in liberal Western societies where women tend to be economically empowered and active. For example, in the UK 69% of business buyers are male and in Spain its 62%. However, the US is actually more male dominated, with 86% of buyers male.
The difference compared to franchise buyers is statistically insignificant, with 83% of buyers male.