Who Will Take Over When Baby Boomers Retire?
“Who will run my business when I retire?”
If this thought is running through your mind, you are not alone. The number of Baby Boomers in the U.S. is currently hovering around the 80 million mark – many of whom are business owners approaching retirement age. This is one reason why business sales were at an all-time high by the end of 2016, according to BizBuySell.com, the largest business for sale marketplace on the Internet. This trend is expected to continue as Baby Boomers head toward retirement and prepare their businesses for a transition to the next generation or put them up for sale.
Generational Shift For many business owners nearing retirement, one option is to transition ownership to the next generation. The idea of preserving a family legacy is appealing. But what do you do if the next generation is not interested in joining the family business? The 2016 Global Family Office Report found that 69% of family offices predict a transition in the next 15 years, only 37% report interest from the younger generation to continue in the family business. The next generation may want to start their own business. Where does this leave Baby Boomers who are unable to hand their business down the family tree?
A Market for Selling As sales of businesses climb in numbers, the number of buyers in the market has also increased. An estimated 8 million private companies will be sold within the next 15 years, according to the Exit Planning Institute. This means it is extremely important to stand out as a viable and successful business when selling.
The sooner you start the exit planning process, the more success you will find in selling your company.
Some major exit planning areas to evaluate and optimize include:
Timing – you should start planning your exit 18 months to 3 years before the actual sale.
Examine your business – evaluate the 5 critical areas of your business that buyers will be using to determine the value of your company.
Resolve conflicts – all litigation and ownership issues should be resolved before the buyer conducts their due diligence review.
Christopher Snider, President/CEO of the Exit Planning Institute, has predicted that two thirds of business owners will be selling their business in the next decade, but a large number of businesses won’t sell due to a lack of preparedness in exit planning.
It is up to you, the business owner, to not fall in that larger percentage of companies who failed to prepare properly for a transition event.
The answer to the question, “Who will run my business when I retire?” is substantially under the owner’s control. When you engage in our Growth to Exit® process, the 5 critical areas of your business are evaluated and best practices are implemented. At the end of the process, your company is more valuable to an interested buyer, because the problem areas have decreased.
If you own a middle market company and you are considering retirement, please contact Jim Shields at (972) 267-3467 to learn how Growth to Exit® can increase the enterprise value of your life’s work.