By Scott Gardner
You, or someone very close to you, are part of 78 million Americans that make up the largest population segment in the United States: Baby Boomers. This generation is classified as anyone born between 1946 and 1964. According to a recent study by BIG Research, 9% of boomers with household incomes exceeding $50,000 are small business owners. Using simple math that means 7 million companies in the United States are owned by individuals 44 – 62 years old.
If you or a family member fall into this category (baby boomer
business owner), what is your exit strategy with your business?
Currently, 33% of business owners in America will successfully
transfer their family business to the next generation (Family
Firm Institute). If you fall into the majority of US business
owners (67%), then your children (X & Y generations) have most
likely opted to not follow in your footsteps of taking over the
family business, leaving you with significant, life shaping
decisions.
It is safe to say that 5 million baby boom business owners do
not have a son or daughter aligned to take over their
privately-held business (due to choice or circumstance). This
massive group of societal leaders is now left with only a
handful of options:
• Keep the business well into their retirement years, possibly
leaving it to estate settlement proceedings
• Dissolve the business should competent leadership not be in
place after retirement
• Sell the business to a qualified buyer and have financial
stability for future retirement and heirs.
Based on the financial burden Baby Boomers have from their
children, parents and own personal lives, combined with the wave
of owners reaching retirement sooner rather than later, we
recommend the latter -- sell the business.
The Exit Planning Institute has projected that over the next
12-15 years, more than 8 million privately-held US companies
will be sold. This is a tidal wave of “for sale” companies
flooding the market place, primarily due to baby boomers seeking
retirement. The sheer volume of companies for sale will
inherently reduce purchase prices due to simple supply-demand
economics; tipping the balance of available businesses for sale
compared to capable, motivated business buyers. Trying to stand
out in a crowd of sellers will be difficult due to a saturated
marketplace of other baby boom-owned businesses. Those business
owners that truly plan ahead and start executing their exit
strategy today, can avoid a major dilemma and be prepared for
the future (a flooded marketplace of similar companies for
sale).
In order to start the process of planning the sale of your
business, you first need to know what that business is worth.
Determining the fair market value of your business can be an eye
opening and empowering process. Seek out professional,
independent expertise in order to conduct an accurate business
valuation report. For the purpose of planning and determining
fair market value, you should expect business valuation fees to
range from $3,000 - $7,000, relative to the size and
complexities of your small business operation. Once you have
identified what the company is worth, you can then make
decisions with confidence and choose your future path wisely.
You will also be able to better understand value drivers
specific to your type of business and industry. If the stars
are aligned, you may wish to consider selling the business
sooner rather than later. If the value is lower than you had
expected, you can strategically grow and refine your business to
increase value for your future exit. Timing is everything in
the sale of a business.
Don’t try to go at it on your own as that can be a long,
painstaking process filled with inaccuracies and frequent
misses. Rely on trained professionals and advisors to guide you
down the exit planning path and give yourself plenty of time to
do it right. A typical exit advisory group could consist of an
attorney, accountant, business appraiser, business
intermediary/broker, and financial planner. For smaller
businesses, a couple of these roles can be consolidated for cost
efficiencies.
Now more than ever it is critical that baby boom business
owners figure out where they stand so they can strategically
navigate for the future. You may have heard the adage, how can
you be lost if you do not know where you are going? Ask yourself
where you want to end up in life, not just for yourself but your
family. What new challenges or hobbies do you want to take on
in the second half of your life? Can you afford to do these
things? Determine your ideal destination and end result, then
reverse engineer your path to reach those specific goals. For
the retirement planning of a small business owner, the starting
point in all of this should be a small business valuation. It
takes years to build a successful business, don’t rush your
exit. Know your value, know your business!
About the Author: Scott Gardner is President of
http://www.FairMarketValuations.com, one of the nation’s largest
networks of business valuation consultants. 400+ experts serve
all major US markets - Fair Market Valuations delivers
face-to-face business valuation to small business owners
planning to sell or grow.
Source: http://www.isnare.com
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