According to a PriceWaterhouse Coopers' survey of middle market companies, there are 9.5 million business owners in the US who are likely to be over 50 years old.  They also found that 2 in 3 of the respondents plan to leave their company within the next ten years.  Yet only 22% reported having done any exit planning.

First Baby Boomers Reach 65 in 2012

Which boomer business owners will be ready to compete for shortage of buyers?

Starting next year, the first Baby Boomers reach age 65 with the last of the boomer's turning 65 in 2029.  People refer to this phenomenon as the "Age Wave", a term coined by Ken Dychtwald, a noted demographer expert who has written extensively on the topic of the aging baby boomer generation and its impact on our society.  This is a generation of hard working, driven individuals, many of whom, as we see in the survey cited above, own businesses.  In fact, over the last 30 years, over 5 million companies with annual revenues of $1 million to $75 million were founded.  Over the next 20 to 30 years, all of these businesses will change hands in some fashion.  What does that mean to the business owner who hasn't even begun to consider an exit strategy? 

In Economics 101 we learned about Supply and Demand.  I remember the professor standing in front of the class with his arms crossed in front of him in the "X" shape demonstrating the supply/demand curve.  As the supply of retiring boomer business owners flood the market, and there are fewer qualified, well financed buyers in the market, there will be a downward pressure on prices.  Every business owner needs to think about this now even if a transition is years away. 

In fact, just because you want to sell your business, doesn't mean that it will sell.  According to the Business Reference Guide, published by Business Brokerage Press,  20% of all businesses are for sale but only one in four actually sells.  The odds get a little better the larger a company gets--but even those greater than $10 million in sales only have a 50-50 chance of selling.  And if your company doesn't sell the first time, the next time you market it, the odds decrease even further.  This means you really must get it right--the first time! 

As Winston Churchill said so succinctly "He who fails to plan is planning to fail."  This was true during WWII and is also true for those of us who were born in the genereration following the war. As we start to reach traditional retirement age, especially in these harsh economic times, planning for the future is even more difficult.  And if you are like many of our clients, a large part of your net worth is tied up in an illiquid asset-your business.  So failure to successfully monetize this asset is not an option.

Therefore, it becomes imperative that you do everything you can to increase the salability of the business by improving profitability, building a strong and stable management team, putting in place systems and controls, creating a realistic growth plan and growing revenue and profit in order to maximize the value of the business-all of which are part of the Exit Planning process.

We always caution people to run their businesses today as if they were going to sell tomorrow because you never know when you will get hit by a "bus."

Even if you are not planning on transferring your business within the next 10 years, these steps will allow you to reap the short term benefits--your business running more smoothly and profitably today as well as  being  prepared for the unforeseen and being in the strongest position possible when it is time to sell.