Baby Boomers, that generation born between 1946 and 1964, represent the largest segment of the United States population with a size of roughly 78 million. Recent studies indicate a couple of trends with regard to this segment.
10,000 Retiring Each Day
First, “Boomers” are starting to retire in droves. Recent studies indicate the rate will be steady at about 10,000 per day for the next 19 years, but the rate may actually accelerate as some boomers move on to retirement earlier than previously anticipated.
7 Million Businesses are Owned by Boomers
Secondly, an estimated 9% of boomers with annual income in excess of $50K/year own businesses. The numbers are astounding: an estimated 7 million businesses in the United States are owned by Boomers. Of those in this category is it estimated (according to the Family Firm Institute) that 33% will successfully transfer their companies to the succeeding generation. For the remaining 67% or so, generation X & Y have checked the “opt-out” box on taking the company reigns for another 30 years.
Boomers, it’s time to sell
For those without a transition plan, the time to begin was yesterday. These decisions will shape the health and future of the business and the robustness of your retirement account. When it does come time to sell, the longer you wait, the more limited your options will become. In general, here are a few of the potential options for business owners without a succession plan or with someone to take over the company.
- Continue to run the business. Instead of retiring, you could treat the business like Warren Buffett, working with no intention of retiring and eventually leaving the business to estate settlement proceedings.
- Complete business dissolution. If no competent leadership or transition owner, group or plan comes to the forefront a complete dissolving of the business and sale of the assets may be the only option to take.
- Sell the company. Having a liquidity event will most likely create a nice retirement buffer and more stability for any potential heirs of your estate.
An uncertain future and the financial burden of parents, children and themselves makes option #3 above the most ideal for any retiring Baby Boomer without a particular plan for exit. Sell, sell, sell. The time to sell may not be today, but the time to prepare by speaking with an consultant is certainly now.
8 Million Business Sales in a Decade
The Exit Planning Institute projects more than 8 million private businesses in the United States will be sold or exited in the next 12 to 15 years. This could be compared to a literal Tsunami of of assets flooding the market many which will be driven by the retirement and transition from retiring Boomers.
Supply/demand economics should alert entrepreneurs of the impending reduction in prices. Such a change in private business economics will also tip the balance of power to potential buying managers and investors. Standing out of a crowd of businesses in a Baby Boomer-saturated business market will become more and more difficult.
Being prepared to sell your company is a process, not an event. It first starts with an expert business valuation and then an execution of the entire business sale process. With an expert valuation in hand, you’ll better be prepared when the timing is right. Timing is everything when it comes to selling your business.
Strategically navigating an uncertain future in a market as soft as that of recent vintage will require input from multiple sources, including attorneys, M&A experts and business consultants. Post liquidity event, retirement planners will also help to provide the needed resources to maximize ROI of your personal wealth portfolio. While the impending flush of similar businesses should make you ready to prepare the company for sale, you should never rush the sales process. Maximize without selling yourself short.