The Harsh Reality is Buyers Want Lifestyle Businesses, Not Workaholic Traps
If you’ve been in business for more than 10 years and you’re in your late 50’s or early 60’s, you grew up with a ‘work ethic’ that was based on hard work, long hours, and sacrifice for the future. To name a few.
We now see the consequences of these principles with relationship breakdowns (I know a hand full of business owners on their first marriage), health (mental and physical), and a broader societal impact on how we have a dog-eat-dog behaviour bred into us.
The dilemma is, or at least the belief, is that without the work ethic the result would not have come. But leaves us with the assumption that we needed it all. And we go around the merry-go-around and who wants to get off first and risk being wrong.
Enter Generation X and the Millenials. They look at that lifestyle and say “I don’t think so”.
They look at a business with 21st Century eyes. They are looking for a more balanced existence. Some might say their cake and eat it. And you as a Boomer, you can shake your head and say “That’s not right”, but they are the ones with the interest and the funds.
Harsh as it may seem, when it comes time to exit and realise the value you’ve created, you must face this reality – buyers these days are seeking lifestyle businesses, not workaholic traps.
Recent surveys highlight this growing trend:
- A 2022 report by KPMG found that 68% of business buyers prioritise work-life balance and flexible schedules when evaluating acquisition targets.
- An EY study revealed that 74% of buyers are willing to pay a premium for businesses with efficient operations that don’t require the owner’s constant presence.
- According to a 2023 survey by the Australian Institute of Business Brokers, over 80% of buyers expressed a strong preference for businesses that could run semi-absentee or with minimal oversight.
It’s a harsh reality that many business owners face – the very thing that made their company successful (their relentless work ethic and hands-on approach) may now be a deterrent to potential buyers seeking a more balanced lifestyle.
The Challenges of Realising the Full Business Value
As an increasing number of lifestyle-oriented buyers enter the market, business owners looking to exit may encounter several challenges in realising their company’s full value:
1. Overreliance on the Owner
If the business is heavily dependent on the owner’s personal involvement, it can be challenging to demonstrate its ability to run smoothly without their constant presence.
Buyers may perceive this as a risk and factor in the costs of hiring and training a replacement, potentially lowering the valuation.
Funding institutions are nervous lending to buyers where the business has an ‘owner risk’.
2. Lack of Systems and processes
Many businesses thrive on the owner’s deep industry knowledge and personal relationships, but lack documented systems and processes.
This can make it difficult for a new owner to step in and maintain operations at the same level, raising concerns about the business’s sustainability.
3. Inefficient Operations
Businesses that require excessive working hours or have inefficient operations may be less appealing to lifestyle-oriented buyers.
They may perceive the business as a potential source of stress and burnout, rather than a path to a more balanced life.
4. Difficulty Attracting Top talent
Businesses that demand long hours and constant owner involvement can struggle to attract and retain top talent.
This can be a red flag for buyers seeking a well-oiled machine that can run smoothly without their constant oversight.
Preparing for the Lifestyle Buyer
To overcome these challenges and maximise the value of your business, it’s crucial to take proactive steps to align your company with the preferences of lifestyle-oriented buyers. Here are some strategies to consider:
1. Implement Systems and Processes
Document your business’s operations, workflows, and best practices to ensure seamless continuity under new ownership.
2. Build a Strong Management Team
Develop a capable management team that can run the business effectively with minimal owner involvement.
3. Optimise Operations
Streamline processes, leverage technology, and implement efficiency measures to reduce the workload and create a more balanced operation.
Scrutinise Revenue Streams
Streamline processes, leverage technology, and implement efficiency measures to reduce the workload and create a more balanced operation.
Forster a Positive Company Culture
Cultivate a company culture that values work-life balance, employee well-being, and professional growth, making your business an attractive acquisition target.
We call that creating a pathway to a Business Village Culture
By taking these steps, you can position your business as a desirable lifestyle opportunity, increasing its appeal to the growing pool of buyers seeking a more balanced approach to entrepreneurship.