Kenny Skinner was working overtime at the crane business he shared with his brother, Mike, because they couldn’t find workers, prompting Skinner to sell the business and a concrete pumping business he possessed.
“I was old and couldn’t find help. Nobody wants to work. The new owner has the same problem,” Skinner said. “When we sold in May, we only had ourselves and two other employees. I had been doing double duty for three months. We would have liked to hire one or two more people.
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Skinner is among a growing number of Colorado Springs business owners who have closed, sold or merged their businesses since the pandemic took hold in early 2020, according to figures from a business database. maintained by the Better Business Bureau of Southern Colorado. The number of businesses closing, selling or merging in 2020 more than tripled from 146 to 556 in 2019; it climbed to 571 last year and this year totaled 290 through September.
The final tally for this year will likely be around 400, still well above pre-pandemic levels, said office CEO Jonathan Liebert.
“This year we are seeing more people selling or merging their business with another (business). They have good business, but they’re done after two tough years. Either they partner with a stronger competitor or they take the opportunity to sell the business when sales are good and they are still making a profit.
Many baby boomer owners are retiring or selling their businesses to their children or a long-time employee, especially with the threat of a recession triggered by aggressive interest rate hikes aimed at reducing soaring inflation, Liebert said.
“Labour issues are a huge concern, along with inflation, recession and the continued threat of COVID. You have all of this in their business at once, so they will decide to either do something different or sell or merge. They can’t keep doing this on their own,” Liebert said.
While most businesses that have closed, sold or merged are small, Liebert noted that several large local businesses have been acquired over the past year or so, with owners receiving some very attractive offers.
Information technology provider Navakai, for example, was sold last year to a Virginia-based competitor that could provide the company with the resources to grow. Berwick Electric merged with a larger St. Louis-based competitor last year, allowing Berwick to operate under its current name with the same management and employees. Defense information technology contractor Boecore has been acquired by a Washington, DC investment firm.
Liebert doesn’t expect the number of closures, sales and mergers to slow down anytime soon. He thinks small business owners have been hanging on since the start of the pandemic 2½ years ago in hopes of a big rebound, but instead found that sales hadn’t recovered as much as they hoped so. He said business owners are “hunkering down” as they prepare for the possibility of a recession in the next six months or so.
“They see people don’t have that much money to spend,” Liebert said. “There is still money to help small businesses, but not as much as in 2020 and 2021. Now they fear the aid will run out and a recession is coming.”
Rob Amerine, president and chief broker of the FBB Group, which helps buyers and sellers sell private Front Range small and medium-sized businesses, said he’s seeing a growing number of businesses that aren’t salable, in especially those that focus on consumers.
Buyers are not interested in these businesses, he said, because sales are declining or the business is not profitable, or both, leaving the closure or sale of business assets as only options.
“We had a hot tub business that was generating $1 million a year in market cash flow, but buyers weren’t interested because they viewed hot tubs as a luxury item, so we had to pull it off the market. “Amerine said.
“We saw a spike in transactions over the past two years, but that slowed down in the second half when inflation and (interest) rates both rose. We had at least a dozen buyers who pulled back once rates started to rise.
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Amerine said retailers are most vulnerable to lower sales when interest rates rise, especially items such as spas, furniture and other purchases related to home construction, where financing plays a role. major in the transaction.
Manufacturers, sign companies and other businesses in the business-to-business market continue to thrive and sell as they come to market, and FBB continues to attract new customers to these markets, he said.
Larry Blevins, owner of American Business Brokers, which handles small business sales in the Colorado Springs area, including Skinner’s companies, said the number of businesses he has listed for sale has doubled in recent years. months to reach 18.
He credits the push to baby boomers deciding to sell their businesses, particularly in the restaurant industry, as they watch the national economy begin to slow and the window to sell at an attractive price begins to close. close.
“(Owners of) family businesses who struggled before the pandemic now want to retire. A small part (the motivation to sell) is difficulty hiring employees,” Blevins said. “Restaurants are a tough sell right now, but ones that have been around for a long time or are unique can still sell.”
Data from the Colorado Secretary of State’s Office shows the number of businesses dissolved in the second quarter jumped 27% from a year earlier. However, the number of new businesses registering with the Office continues to increase (albeit at less than 1%) and the number of businesses renewing their business status has increased by 11% compared to the previous year. ‘last year.
Tony Gagliardi, Colorado state director of the National Federation of Independent Businesses, said the growth in business dissolution and new business formation may reflect, in part, entrepreneurs closing businesses that do not prosper and start a new business to replace it.
Small business owners don’t have a rosy outlook – the federation said on Tuesday its Small Business Optimism Index fell in October to 91.3, the 10th consecutive month the indicator has remained below his average of 98 over 49 years.
The nonprofit’s survey showed that most small business owners expect sales and profits to decline over the next three months, and nearly half say they are still struggling to fill jobs.
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