After sharply declining at the start of the COVID-19 pandemic, the rate of small business deals is nearing 2019 levels again as owners find reasons to exit and sellers see companies that have weathered a two-year storm.
Small business buying and selling activity has been increasing almost every quarter since the initial pandemic shock, according to national data from BizBuySell. As well, sale transactions for U.S. small businesses — often defined as fewer than 500 employees — in the first quarter of 2022 rose 24 percent from the same period last year, nearing 2019 levels.
However, disruptions like inflation, the tight labor market, and Russia’s invasion of Ukraine are leaving some small business owners hesitant, said Max Friar, managing partner at Calder Capital LLC, a Grand Rapids-based small business M&A advisory firm.
Friar predicts even more activity as people and businesses adapt to these disruptions, similar to how many adjusted to the pandemic.
“I don’t think we’ve made up for the businesses that would have otherwise sold (in 2020),” Friar said. “I think there is some pent-up supply in terms of sellers.”
The pandemic also caused major shifts as many people started rethinking their work roles and reevaluated potential new jobs, said Brooks Kindel, a business growth consultant for the Michigan Small Business Development Center at Grand Valley State University.
“From a buyer’s standpoint, if you’re looking at a business that was well-run and had a story that it survived the pandemic and found new revenues and ways to conduct business, that tells you a lot about it,” Kindel said. “If your business can survive the pandemic, you’re a step ahead of the ones that floundered and perhaps closed.”
West Michigan small business owners going through an ownership transition stress the importance of spending time training new owners and retaining good employees to help the new leadership team.
Family-owned specialty food and beverage store Siciliano’s Market Inc. is undergoing a change in ownership after emerging from the pandemic essentially unscathed because it was deemed “essential” and able to stay open through state-ordered restrictions.
Owners of the west side Grand Rapids staple, Steve and Barb Siciliano, are set to retire this summer and will sell the business to longtime family friend Jeff Boorsma, as MiBiz recently reported. Boorsma’s daughter, Tiffany Sipka, and her husband Dan Sipka, will run the business.
The Sicilianos, who opened the market’s present location in 1993, had been considering retirement for the past five years. They started actively planning to sell their business last summer and were approached soon after with an offer from Boorsma. Steve Siciliano stressed the importance of working with the new owners to ensure a smooth transition.
“I’m working very closely with the new owners, training and basically being a mentor to them,” Siciliano said.
Steve Siciliano since January has been working closely with Dan Sipka, who has been working full time in the market for the past two months.
“He’s basically running the store with the assistant manager I have,” Siciliano said. “Now that we’re fully staffed and the new owners pretty much know what’s going on, I could take off whenever I want. We’re tying up the loose ends on a daily basis, basically.”
Most owners should prepare for some period of time when they have to stay at the company, which can vary from about three to six months but may take as long as a year, Friar said.
Ryan Roff — the founder of boldSOCKS who sold his company to Grand Rapids-based OCI Ventures Inc. in March — is choosing to contract with the new owners for a period of time to help them with training and any other questions that arise, he explained.
“Being there has helped them get up and running quickly and they were able to start shipping product the next week (after the ownership change),” Roff said. “I want to see them be successful, and our business has a social enterprise piece to it, too, so I want to see those charities successful and what we worked hard to establish be carried on.”
boldSOCKS staffers who are staying at the company through the transition also are a huge part of navigating the transition process successfully, Roff said.
One Bourbon restaurant founders George and Meg Chittenden, who recently sold their ownership shares to their business partners, echoed this sentiment.
“We’re very lucky with the core group of staff that stuck with us through the pandemic,” George Chittenden said.
Meagan and Brett Freriks, the couple who bought the Chittendens’ shares, had a hand in starting the Bridge Street restaurant when it opened in 2017 on Grand Rapids’ west side.
“They’re going to do great things,” George Chittenden said. “They’ve been there from the beginning as well, so it’s in great hands.”
Changing course during COVID
While Roff was running boldSOCKS in 2020, burnout took its toll as two of the sock company’s biggest markets — office workers and socks purchased for wedding attire — were both severely affected by pandemic shutdowns.
“Navigation during the pandemic was much more of a stabilizer role, and I could sense it in myself that it wasn’t something I desired to do much longer,” Roff said.
The pandemic also made the Chittendens reevaluate their working life, leading them to transition away from owning and running their restaurant. They plan to ensure operations are squared away at One Bourbon before focusing on spending more time at home with their young child, George Chittenden said.
“A silver lining to the lockdown restrictions in 2020 was that it gave us a taste of life outside of the nine-to-five,” Meg Chittenden said. “We were all able to get a different view of how we could live life.”