In the fourth and final installment of a series of articles investigating who is buying and selling small businesses in America, BizBuySell looks at how ethnicity affects buyer demographics and the motivations behind small business acquisitions.
Diversity isn’t a word most people would use to describe sellers in today’s business-for-sale market. More often than not, sellers are Caucasian Baby Boomers interested in exiting their careers to enter retirement. In fact, BizBuySell’s recent survey of small business buyers and sellers found that 86 percent of owners interested in selling their businesses identify as Caucasian.
But what about the buyers in today’s market?
According to BizBuySell’s report, which surveyed over 2000 prospective small business buyers and sellers, buyers are a more diverse group. Although the market still leans Caucasian, just 74 percent of business buyers identify as Caucasian, a slightly smaller number than the 77.9 percent of Americans listed as Caucasian in the latest U.S. Census (2012). Asian/Pacific Islanders accounted for much of the difference, representing 12 percent of the business buyer pot, more than double the 5.1 percent listed in the Census.
However, beyond mere totals, a breakdown of business buyers by race offers additional insights about who is buying businesses and the motivations behind their interest in small business ownership.
More Minorities In Younger Age Brackets
As discussed in a previous BizBuySell report, the number of minorities interested in buying a business is particularly strong in younger age groups. Caucasians again tended to be on the older side, with 48 percent listing themselves as 50 to 64 years old, while another 8 percent were 65 or older. Only 3 percent of Caucasians fell between 18 and 29 years old.
Other races, however, leaned more toward younger age brackets. In fact, the 30 to 49 year old bracket represented the majority of African American (58 percent), Asian (58 percent) and Hispanic (53 percent) buyers. All three racial categories had two percent or less of their population in the 65 and older group, and all outpaced Caucasians in the 18- to 29-year-old demographic.
African American Buyers Motivated to Be Own Boss; Asian Owners Most Likely to Buy Multiple Businesses
When asked about their motivations for becoming a small business owner, a large majority (72 percent) of African Americans cited the desire to be their own boss, compared to 52 percent of Caucasian and Hispanic buyers, and just 38 percent of Asian/Pacific Islander buyers. African Americans were also the most likely to be motivated by better income opportunities and better lifestyles as small business owners.
Caucasian buyers, on the other hand, were most likely to purchase a business as an exit plan from their current careers, with 16 percent indicating they were buying because they don’t like their current jobs.
For Asian-descent buyers, success with a first small business purchase may be a motivating factor for additional investments. When asked about their current employment, 43 percent of Asian buyers said they already own a business, meaning their current interest is either based on a desire to own multiple businesses or sell their current business and purchase a new one. This could become increasingly common across all ethnicities as the economy rebounds, since buyers have more capital and confidence in the small business outlook.
African-American Women Prevalent As Buyers; Asian Buyers Male-Dominated
Although small business ownership remains a male-dominated career path, business ownership is growing among women, especially within the minority demographics. Women made up 39 percent of African American buyers, by far the highest percentage of all ethnic groups. At the other end of the spectrum, only 23 percent of prospective buyers were women within the Asian community, making it the most male-dominated ethnic group surveyed.
International Presence In U.S. Small Business Market
As the corporate world continues its march toward globalization, a trend toward greater global diversity is also occurring within the small business community. When asked about their U.S. citizenship status, prospective business buyers responded in a manner that highlighted strong international influences throughout the small business community.
As might be expected, the Caucasian demographic had the highest percentage of natural born citizens at 79 percent. African Americans followed at 70 percent, while just 40 percent of Hispanics listed themselves as naturally born citizens.
Asian buyers represent the smallest ratio of natural born citizens at less than 10 percent, with the majority (52 percent) listing themselves as naturalized citizens.
Buyer Ethnicity Reflects Type of Business They Are Interested In
Finally, several interesting trends emerged when buyers were asked to identify the type of business they are interested in purchasing. Restaurants were the most popular business category overall, with at least 20 percent of all ethnicities expressing an interest in purchasing a food service establishment. Thirty-five percent of Hispanic buyers indicated an interest in restaurant ownership, outpacing all other ethnic categories and making opportunities for food service ownership the dominant acquisition target for Hispanics.
Caucasians most often sought out manufacturing businesses (22 percent) or a bar/tavern (21 percent). African Americans were the most likely to be interested in acquiring a bar/tavern (24 percent), but also expressed the most interest in a beauty salon or barber shop (17 percent). Asian buyer preferences pushed toward convenience stores (40 percent), gas stations (36 percent) and liquor stores (32 percent).
For both buyers and sellers, it’s important to remember that the racial and ethnic trends that exist in the current business-for-sale market need to be taken at face value. Every business transaction ultimately boils down to basic sale fundamentals (e.g. purchase price, available capital, etc.), regardless of the prevailing demographic trends that may or may not be occurring in specific segments of the market.
BizBuySell is the Internet’s largest business for sale marketplace. Since 1996, BizBuySell has offered tools that make it easy for business owners and brokers to sell a business, and potential buyers to find the business of their dreams. BizBuySell currently has an inventory of approximately 45,000 businesses – spanning 80 countries – for sale at any one time and receives more than 1 million monthly visits. The site also features an extensive franchise directory as well as an easy-to-use business valuation tool. Please visit www.bizbuysell.com for more information.
BizBuySell was founded in 1996 and in 2012 became a division of CoStar Group, Inc. (NASDAQ – CSGP) – commercial real estate’s leading provider of information and analytic services. CoStar conducts expansive, ongoing research to produce and maintain the largest and most comprehensive database of commercial real estate information and offers a suite of online services enabling clients to analyze, interpret and gain unmatched insight on commercial property values, market conditions and current availabilities. For more information, visit www.costar.com.