Retiring Boomers: The Good, the Bad, and the Opportunities

The Good

It has been discussed for a decade now; the huge bubble of people born after WWII until the middle of the 60’s is quickly approaching retirement.  You’ve heard the numbers;

  • Over 78 million people closing in on retirement in the next 10 to 15 years.
  • Boomers own over 65% of businesses with employees, nearly 4 million companies.[1]
  • Retiring business owners selling or bequeathing $10 trillion worth of assets by 2025.
  • This generation controls roughly 80% of all U.S. aggregate net worth.

Those rumblings you hear could be an avalanche of Boomer sellers of unheard proportions, crashing headlong into the U.S. economy, covering the business landscape, and suffocating many would-be affluent retirees along the way.   With all those companies owned and assets generated, what could be the problem?   Who will purchase all these businesses?

The Bad

Some business will sell to employees; some of the larger companies will be absorbed by private equity deals, but only a small percentage.  That leaves the Gen X, Millennials or other Boomers on the “buyer” side of the ledger, an 11% smaller group.  And this imbalance between buyers and sellers will continue for the next 15 to 20 years.

But Boomer business owners are not rushing to sell for several reasons.  Foremost, they are living longer—an average of 30 years longer than a century ago—and retiring later.  Second, why sell when you’ve made it through the last recession and are now enjoying the rewards of a growing economy.  Not all businesses are large enough to fund retirement.  SBA statistics show that 85% of these businesses have less than 9 employees and 53% had less than $500,000 in revenues.  The number of small business which may be marketed for sale in the next five to ten years will be substantially lower than what many had predicted.

What about those businesses ready to sell in the near future?  100% of all retiring Boomer business owners will not be business owners forever. The vast majority of these owners have never exited a business before and even though many plan on selling their business in the next ten years, only a small percent have identified how they will exit and even fewer have put those steps in writing.

Facts about Baby Boomer Business Owners:

  • 80 percent of owner’s wealth is tied up in their companies (an illiquid asset)
  • 60 percent of business owners between the ages of 55-64 have not discussed their exit plans with their spouses or business partners.
  • 78 percent of baby boomer business owners do not have plans for how they will exit their companies. 2

The Opportunities

So what can you do as a Boomer business owner to increase your chances of selling your company for its optimum value?   First, think like an owner, not an operator.   See your business as an asset and think of how you can make it more valuable.  Value the parts of your business that are sustainable and/or transferable.  What are the areas within your company that are sustainable?  Market share, market potential, barriers to entry, differentiation, brand and customer diversity are six areas where you should focus your attention to optimize your businesses value.  What is transferable?  Your product, processes, people and finances can all be passed on the sale of a business so they should also be looked at to maximize value.  In other words, work on your business, not in the business.

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[1] Will Private Equity Inherit Baby Boomer Business? Billy Fink, Axial, June 2013

[2] Successful Transition Planning Institute. 2011-2012

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