Baby boomers are now reaching retirement age at their fastest rate yet, but many members of one of the most entrepreneurial generations in history are facing major issues when it comes to what to do with their businesses.
Recent figures have shown that as of 1st January the oldest members of the baby boom generation are now turning 65 at a rate of 12,000 every day in the US and the UK together. While many may be looking forward to clocking out of their office jobs for the last time and cashing their retirement cheques, the entrepreneurs must first face the potentially daunting prospect of finding buyers for their businesses.
Experts in the US expect the retirement of the baby boomers to forge the largest transfer of wealth seen in history, providing plentiful opportunities across the full spectrum of companies for younger business owners to snap up established and successful businesses at very welcoming costs.
The process that follows a retiree deciding to sell their business is, of course, much the same as that which follows a businessperson of any age deciding to exit a business. The problem lies, however, with the fact that many business owners will leave it until the eleventh hour to see about valuing and planning the offloading of their business. A study published in 2008 into the business habits and plans of business owners who were born during the baby boom - generally considered to be between 1946 and 1964 - showed that while 96 per cent of the people surveyed agreed that having an exit strategy was crucial, just 87 per cent actually had one in place! As many of the boomers will have tied up much of their liquidity and retirement funds in their business, not having a plan in place will only serve to delay their highly anticipated plans for retirement.
So for business owners who are thinking of retiring and want to make sure they will be able to do so when they want to, where is the best place to start exploring the best options for the business?
Exit planning is best thought of in the same way as people think of their wills: the writing up of a detailed and thorough outline of how they want matters handled, allowing them as much or as little control as they wish. A draft plan should ideally be set out long before the retirement date looms, and then updated periodically to ensure that the business owner keeps up to date with all potential options, should they change during in the years preceeding retirement.
A problem that may well prove specific to the baby boom generation is a possible overload of businesses being put up for sale by their peers, all of whom have a disproportionate amount of their wealth tied up in the companies. It is because of this that the importance of identifying the areas of transferable value in businesses has come to the forefront. Areas that could be broken off or delegated to other workers include management, financial controls, customer and client concentration and systems. Effective delegation of these areas can help the business founder shape and fulfill their own legacy aspirations: if a business owner founded the company based on their own dreams and hopes from their younger days, then it would be a shame to let poor planning see these simply kicked to the curb when they retire. Breaking down the business in this way, into assignable and more easily offload-able chunks, is of particular benefit to baby boomers who do not have children, who want to carry on the family trade and retain responsibility for the business.
Regardless of the fact that the seller may have more business experience than most, making use of expert knowledge in tax issues, business law and exit planning can, as ever, maximise the value of a business sale. A business mentor - perhaps a recent retiree - can provide counsel and advice on the more subjective issues and a monthly meeting with such an advisor can lend a certain regularity and form to the process.
The act of shaping a legacy overlaps with priming the business for its continued success in its field. It is crucial to gain the confidence of potential buyers, and for them to fully believe that a business that has been the responsibility of the same person for perhaps a matter of decades, can still thrive when taken on by a new set of hands. A key advantage of constructing the exit plan of the business far in advance, is that a business owner has time to explore the continuing vision for the company, and perhaps take the elementary steps towards venturing out into new and potentially lucrative branches of business. New ventures are not only likely to prove inspirational to new buyers keen to stamp their own mark on an acquisition, but they will help the business to stand out among perhaps a range of similar opportunities.
Throughout the process it is clear that the selling of a baby boom business efficiently and profitably relies on a little consideration and a lot of forward planning. With the older age group of boomers already embarking on their richly deserved retirements, the younger ones are well placed to develop their exit strategies in the next few years. When the time comes, then, they will be able to let their last hatchling fly the nest with ease and confidence, allowing them to embrace their golden years.
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