Chia-Li Chien, PhD, CFP®, PMP®

by Chia-Li Chien, PhD candidate, CFP®, PMP® Apr. 5, 2018

The wave of baby boomers exiting their businesses can put a lot of pressure on basic supply and demand. A recent study found that “1.36 to 2 million baby boomer–owned businesses would be for sale” from 2012 to 2022 (Bronza, Auslander, & Ma, 2015), but the number could grow substantially to 3.8 million by 2032 (McMann, 2012).  The “large supply on the market will [put] downward pressure on pricing” (McMann, 2012).  The supply and demand condition in the merger and acquisition market can cause the selling cycle of a business to be unpredictable.

A business owner wants to be in a seller’s market to avoid pricing pressure from market transactions. A seller’s market is “a situation in which demand exceeds supply and owners have an advantage over buyers in price negotiations” (Investopedia, 2018). Figure 1 illustrates how a seller’s market is often clustered in the larger deal size (selling price) such as above $1 million. Selling prices that are less than $500,000 often occur in a buyer’s market. However in 2018, selling prices between $500,000 and $1 million constitute a seller’s market compared to the 2017 buyer’s market. Hence, smaller selling-price firms have a lot more pressure on their desirable selling price.

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Chia-Li Chien

Assistant Professor and Director of Financial Planning Program at California Lutheran University School of Management

Chia-Li Chien, Ph.D., CFP®, PMP, is a Succession Strategist of Value Growth Institute, dedicated to helping private business owners increase the equity value of their firms. Dr. Chien is also Assistant Professor and Director of the Financial Planning Program at California Lutheran University. She is the award-winning author of the books "Show Me the Money" and "Work Toward Reward." Dr. Chien can be reached at jolly@chialichien.com.

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