Baby Boomers blossomed into a great generation of entrepreneurs. In fact, Inc. magazine reports that 66% of all companies operating in the U.S. today are owned by Baby Boomers. That shouldn’t be a great surprise. Those of us born between 1946 and 1964 are renown for being creative, self-reliant, go-getters inspired by our hard working parents. We turned ideas into businesses and poured ourselves into accomplishment. It was ingrained into our generation to run, not walk, to the finish line. The only problem is nobody told us where the finish line actually is. When is the right time to stop running?
Today, Boomers are staring retirement in the face, and for many entrepreneurs, the burning question is, “What do I do with this business now?” The passion to grow isn’t quite the same as it was a decade ago. Health issues are beginning to rear their ugly head. And the children have no interest in taking over the family business. Some may still want to work a little longer, just not at the same frenetic pace.
As one might project, this group is aging out of the world of business ownership. According to the Pew Research Center, a nonpartisan American think tank located in Washington, DC., the oldest of the great Boomer generation began turning 65 on January 1, 2011 at a rate of 10,000 per day. This trend will continue for another 19 years! It is estimated that ten trillion dollars’ worth of businesses will change ownership by 2025. The California Association of Business Brokers converts that to the eventual sale of over 12,000,000 privately owned Baby Boomer businesses.
Business Boomers now face a dilemma. How to exit stage left? How do we moonwalk ever so quietly out of the business without everything coming crashing down around us? We can barely escape for an occasional golf outing without a cell phone cry from the office. Most owners report while they wish to retire, they still want the legacy of their business to continue.
Should we take a cue from Willy Wonka and just give away our chocolate factories to millennials who possess the technology and youthful naiveté to take the business to the next level? Of course not! If there is to be a golden ticket, the Boomer who built that business should be the one to claim the prize. After all, it was the owner who poured heart and soul into building the business. Now, with visions of hatching nest eggs, we want to convert our currency from an active enterprise to cash in the bank. We hear the call of Jimmy Buffet, not Warren Buffet.
How do we know if the timing is right?
As with most things in life, timing is everything. One of the biggest mistakes owners make is waiting too late to sell the business. Ideally, one wants to sell when the business is performing at its best. Unfortunately, owners are prone to think, “Why should I sell when things are going so well? Why not ride the wave all the way to the bank?” The answer is buyers will pay a premium for companies in ascension. Once the business begins trending downward, the rose becomes less fragrant and values plummet.
Another issue related to timing is the length of time it takes to sell a business. It can be a slow tedious process. It helps if one has their financial house in order and current accounting records validate cash flow. Coming to a fair and justifiable price, confidentially marketing the business, finding potential buyers, and structuring the transaction can easily take up to a year.
Additionally, the current financial climate is fertile. As of this writing (July, 2016) there is still money available in the marketplace. Entrepreneurs and private equity firms are looking for good businesses in which to invest. Interest rates remain low, although we know the economy can change on a dime. That is the point. Market conditions are favorable for selling (or buying) a business right now, but who knows what tomorrow may bring? Waiting a year or two could actually evolve into waiting 4 or 5 years for similar market conditions.
Unfortunately, the average business owner does not possess the knowledge in the intricacies of selling a business. The skill set required to build a successful business is not the same as those employed to successfully sell the business. The questions paralyze us: How do I put a realistic price tag on my business? How do I find and attract serious buyers? How do I promote my company without exposing confidential information or scaring the heck out of my employees?
It may be appropriate to hire a business broker. A broker can help guide you through the maze of questions you will have. They can help you create and execute a plan to maximize your valuation. Business brokers usually have a well-culled database of thousands of potential buyers looking to buy businesses from all over the United States. They can help evaluate your company and work with your trusted advisors. They can position your company for sale and articulate your value in the marketplace to an array of potential buyers. Much like a real estate sales person, brokers typically charge a commission and only get paid when the business sale closes. Since their commission is a percentage of the sale price, it is in their best interest to maximize the price they bring you.
There are trusted advisors to help along the way. But the question of where the finish line and when to walk away from the business remains a highly personal decision. Planning is crucial to a graceful and lucrative exit. It’s always best to go out on top.
By Steven Moore
About the Author: Steven Moore is a senior-level sales and marketing professional located here in Richmond. He is Vice President of Capital Business Brokers, a full-service business brokerage firm specializing in the confidential sales of privately-owned, small and mid-tier businesses located throughout the United States. Capital Business Brokers is a wholly owned subsidiary of Transact Capital Partners, LLC.