Health Care Costs Impact Small Business Sales

By Nathan Eddy  |  Posted 2016-01-04 Print this article Print
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Around 20 percent of brokers said they’ve had a client sell their business due to higher health care costs, according to the BizBuySell survey.

More than 20 percent of national business brokers have had a client sell their small business due to higher health care costs, according to a nationwide survey of business brokers conducted by BizBuySell, a marketplace for buying or selling small businesses.

The survey also found 8 percent of surveyed brokers have had a client sell their business largely due to a minimum wage increase or potential minimum wage increase, a growing trend that is likely to be important for small business owners in 2016.

More than 20 percent of surveyed brokers said they’ve had a client sell their business due to higher health care costs, which the report said would be an issue to watch in 2016, especially considering that a new Affordable Care Act mandate for companies with 50 or more employees will take effect in January.

"It's likely that some owners will see high heath care costs as a reason to sell, but I think the percentage selling because of these costs will remain similar over time," Bob House, group general manager of BizBuySell and BizQuest, told eWEEK. "Owners will certainly take the time to find out how much health care costs are affecting their bottom line and make a decision based on those numbers. Overall, however, the majority of small business owners have a variety of reasons to sell, so health care costs will rarely be the lone cause."

Brokers in the Northwest, where cities like San Francisco and Seattle recently upped the minimum wage to $15 an hour, were the most likely to have seen sellers exit due to wage rates.

"I'd say the results do echo what we've been hearing in the market. We know health care costs and changing regulations, specifically regarding minimum wages, are items small business owners often keep an eye on," House said. "For example, in our recent survey of small business owners, most respondents were against a higher minimum wage rate, however, only one in four said an increase would quicken their exit strategy. That holds pretty consistent with what we heard from the brokers in this survey."

As the election cycle continues, brokers said the issues most important to them are tax reform (61 percent), economic policy (52 percent) and health care (29 percent).

In terms of potential threats to the small business-for-sale market, 22 percent of brokers listed higher tax rates as the single biggest threat, followed by rising interest rates (18 percent) and global financial instability (16 percent).

"Small business owners should familiarize themselves with both national and local regulations, then closely monitor how such costs are affecting their financials," House said. "While every business will have their own individual variables, owners should try to find a good middle ground that keeps employees happy and protected but allows the business to remain profitable. Ultimately, owners may need to pass along some of these costs as higher prices to their customers."



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