Baby Boomers are Heading for the Exits
The Silver Tsunami
Those of you who have been reading this blog for a while are familiar with the term “The Silver Tsunami“. It pertains to the Baby Boomer business-ownership sell-off – all the businesses the Boomers have built and now are ready to sell so they can head to the golf course or take that cross-country motorcycle trip they’ve put off lo these many years.
As Baby Boomers move into retirement age, we will witness an unprecedented transfer of business ownership, yet the survey reveals what we’ve known for years: most business owners are unprepared. To wit: according to the report, some 77 per cent of Baby Boomers expect to exit their business within the next 10 years, but only 34 per cent of these have given this event the first thought, let alone developed a strategy to make sure their business is as highly-valued as possible.
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What are the Issues Here?
Financial Acquirers:I’ve written often about financial acquirers – private equity groups, family offices, high net-worth individuals, etc. – for at least the last 18 months. There are far more financial acquirers than there are strategic ones. A business owner that focuses on finding a strategic buyer is ignoring the largest segment of the business-buying market.
The Next Generation:Aside from the fact that fully 13% of the survey’s respondents had “never even thought about” how they would exit their business, 16% said they thought they would transfer it to their kids. Well, as I’ve written before, that’s ain’t gonna happen, bucko!
Last week’s post referenced a January 2019 report by UBS, the Swiss banking giant, that surveyed business owners and found that the chances of the kids taking over the business were slim to none. In fact, many owners did not feel confident that their kids could run the business – other than into the ground.
Not too long ago, I posted an article about a family that’s dealing with this very issue. As I said at the time, when the parents realized that their kids – employed in the business – and the kids’ knucklehead spouses – also employed in the business – were not capable of taking it over, the options were not pretty.
A Shortage of Professional AdvisorsThere are not early enough trained, professional business brokers to handle the coming wave of businesses that are headed to market between now and 2035. This is borne out by the fact that the owners of so many small and mid-sized businesses call a real estate agent when it comes time to sell. And, as I’ve written countless times before, and in many different ways, hiring a real estate agent to sell your business, no matter how talented that agent may be, is tantamount to hiring an award-winning plumber to replace your hip.
Mistakes Made
Many business owners think that selling a business is like selling a home – which, presumably, is why some business owners list their business for sale with a real estate agent, a condition that will almost guaranty that the business won’t sell.
Like most people, business owners don’t know what they don’t know. Aside from the need to prepare their business for sale, they don’t know how to determine what the market suggests the business is worth. They don’t realize the extent of the due diligence process that a buyer will go through and how to prepare for it. They think that from a financing standpoint, buying a business is like buying a car; the buyer heads on down to their local banker and gets a loan. In more than 85% of small and mid-size business sales, it doesn’t work like that. Business owners don’t realize the time it will take to, first, find a buyer and, second, get the deal to the closing table.
Come to think of it, even the most talented real estate agents don’t know any of that, either; to say nothing of how to market a business, negotiate the terms of a sale, advise on financing and bring the deal to a successful closing.
The Bottom Line
Even before the late and legendary business management guru, Peter Drucker wrote about it in the mid-1970s, every survey, every demographic projection, every expert that pontificates on the subject has been warning about the Baby Boomer generation at every stage of it’s path through life. Boomers as a group have been equated to a pig eaten by a snake in that one could watch the Boomer generation progress through the various stages of life by looking at the impact that passage had on, well, everything.
In the 1950s, communities had to build more primary schools as the Boomers entered the education system. The demand for teachers exploded. In the 1960s, as the Boomers started driving, car makers had to ramp up production to unprecedented levels. In the 1970s, as Boomers started to marry and have children, the demand for diapers, child care and bassinets went through the roof. In the 1980’s, as the Boomers were buying houses, housing shortages were everywhere. More builders were needed, more lumber was needed, more tradesmen or all types were needed. And on and on…
Now, the baby-boomer business-ownership sell-off has started and many more qualified business brokers are needed to help them sell the businesses they started and built.
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Our course, The Basic “How-To” of Becoming a Business Broker”, teaches how to become a professional business broker.
Become a Professional Business Broker…
If you have any questions, comments or feedback on this topic – or any topic related to business – I want to hear from you. Put them in the Comments box below. Start the conversation and I’ll get back to you with answers or my own comments. If I get enough on one topic, I’ll address them in a future post or podcast. I’ll be back with you again next Monday. In the meantime, I hope you have a profitable week! Joe
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