Prepare for The Boomer Tsunami. It’s coming

Much has been written over the past 25 years about us baby boomers. I just found out we even have our own National Association. But there’s a whole lot fewer discussions about the impact on the boomer business owner that wants to retire some day and doesn’t have a natural successor to take over the business. So what’s the coming Boomer Tsunami? It’s likely that nearly 7,000,000 businesses owned by baby boomers may try to be sold over the next fifteen years.  I’ll discuss why it’s coming, why the owner should care and the first steps the business owner needs to take to start the exit planning process.

According to the research done by our firm, B2B CFO, and outlined in The Exit Strategy Handbook, baby boomers own about 12,000,000 small businesses. Traditionally, fewer than 40% of businesses successfully transfer from one generation to the next. That means nearly 7,000,000 businesses could potentially be for sale in the next fifteen years, just due to the age of the owner and the lack of a natural successor. That’s important on both the ability to sell a business and the value received.

Unfortunately for most small business owners the value of the business is the largest part of their net worth.  Without selling the business the owner will not be able to the active lifestyle in retirement they’ve dreamed about. The value of a business is likely to fall if there is a glut of competing businesses for sale due to the Boomer Tsunami. And only the businesses that are strong and have future potential will actually be sold.

Here is the first step – write out your goals! Besides the obvious financial goals answer these questions: Do you want to continue working in the business? What should happen to your employees? What about your legacy in the community or industry? Then, write out what you plan to do after you sell the business. Most of us won’t enjoy playing golf five days a week or just sitting in our chair watching tv.

Having been involved in over 30 transactions over the past twenty years, I’ve learned that excellent planning and good execution dramatically increase both the likelihood of success and the value of the business.  It really helps to have a trusted business advisor to help walk you through this time consuming process.

In future articles, I’ll expand on success factors the exit planning process. Please share your comments.

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