By Robert Warrick Feb. 2019
We’ve all read the headlines and heard the talk. “Baby boomer business owners are going to be exiting in record numbers. The tidal wave will be immense. Get ready for the wave.” But guess what, it’s not happening — at least not yet. Don’t get me wrong, eventually every boomer business owner will leave their company, but I don’t think the exodus will look like the headlines expect.
Boomers are roughly defined as anyone born between 1946 and 1964, meaning today they are between 54 and 72. Assuming boomers are equally distributed among that age range, a little more than half of them are under the age of 65. It is quite reasonable to expect that they are still actively operating their businesses. But, what about those over the age of 65? Shouldn’t their mass exodus from ownership been felt by now?
Not so fast……. To understand why baby boomers over the traditional retirement age of 65 are holding onto their businesses, it’s important to dig a little deeper into the psyche of today’s baby boomer business owner:
- They Are Still in Recovery Mode: Whether in actual dollars and cents, or purely in their minds, baby boomer business owners were strongly impacted by the recession of the late 2000’s, and most saw their retirement savings greatly depleted. Many have recovered and are in a healthy position, but regardless of the current size of their nest egg, the emotional impact of the recession put them in a continuing mode of recovery, which plays out by them holding on to their business.
- Unknown Personal Future: Baby boomers are uncertain about their personal futures. How long will they live? How much will that cost? Will there be any unforeseen expenses? How much money is needed for retirement depends on what the expenditures are for a person to maintain the lifestyle they are accustomed to, though health must also be factored in. This can be tricky, especially when considering advancements in medical care coupled with rising costs. All of this reinforces baby boomer’s commitment to earning and saving as long as they can. Again, this often means holding on to their businesses.
- Business Owners are “Doers”: You know the type. They can’t sit still, always need a project, and are busy-busy-busy. When they’ve mentioned retirement in the past, you’ve thought, “Yeah right, they can golf or fish for maybe two days before they get bored.” That’s true. These entrepreneurs need someplace to go every day and something to work on. There’s nothing better for that than the profitable business they currently own.
- Confident and Riding a Good Wave: Generally speaking, economic times are currently good, business owner confidence is at, or above, pre-recession levels, businesses are healthy, and owners are profiting. To business owners who rode through the recession and recovery, this is a time of reward for their effort and persistence. The Midwest, in particular, is showing impressive growth, with most small business owners rating the health of the national economy as good and 87 percent saying their cash flow is healthy. This is yet another “why sell my business” factor.
So, what does this mean to the marketplace? What should all these baby boomer business owners be doing? The popular belief seems to be that if they take their business to market, it may be lost in a sea of others for sale, and buyers will have a feeding frenzy as they buy business after business for bargain prices. Here’s the reality check:
-Fewer baby boomer business owners going to market than expected
-Businesses with good cash flow are in high demand
-Premium prices are being paid for quality businesses
-The next decade could see historic levels of wealth transition through SMB M&A
The above-mentioned reasons boomers are holding onto their businesses are very real. You will need to address each to make sure you are ready to sell. Do you have enough money saved? Do you have a purpose for life-after-business? If so, you might be in a perfect position to capitalize on a strong seller’s market, the type we might not see for many years to come. Now might be the best opportunity you will have to maximize your value as you sell.
Robert Warrick is Founder & President of WMS Companies, Inc, a business advisory firm specializing in commerce enablement, mergers & acquisitions. Business Brokerage is through Calhoun Companies.
