Much has been published about the economic impact the Baby Boom Generation has had on the products and services they purchased at various stages of their life. As they approach retirement age, there are forecasts for growth in retirement services, health care services and housing to accommodate the needs of this group. One statistic that has not received a lot of publicity is the fact that Baby Boomers, who represent 25% of the U.S. population, own 43% of the small, privately held businesses in the nation. In his book, The Exit Strategy Handbook, Jerry Mills predicts sales of these businesses to increase from a current estimated average of 24,000 per year to 378,000 per year through 2029. This will result in a “tsunami effect” that will likely create a buyers’ market for these businesses and result in many businesses forced to liquidate due to lack of demand. Business owners who effectively plan their inevitable exit from the business well in advance will achieve a higher degree of success than those who wait until they decide to retire, or worse, do not live to retirement leaving their heirs to deal with the business.
The key element in establishing the successful sale of a business is to put together an effective team of professionals to assist in planning and preparation of the business for sale. This “Success Team™” should be assembled early in the planning stage in order to minimize obstacles encountered during the process. I was recently involved in with a business that had not prepared for the proposed sale and had a short closing window. With little time available to address issues, any item encountered during the buyer’s due diligence process that could not be immediately resolved resulted in a proposed reduction in the selling price. While it is unlikely that all the buyer’s requests can be anticipated, preparing for the most common due diligence requests will reduce buyer’s potential objections and expedite the process. The more the seller can do to address the buyer’s risk concerns during negotiations, the higher the price the seller should be able to command. In addition, the planning and preparation will separate the business from the other companies who are looking for a buyer.
In addition, the Success Team™ should work together to complete the necessary tasks freeing the business owner to focus on managing the business. Larry Reinharz, the Managing Director of Woodbridge International, estimated that 80% of business sales that are delayed or are never consummated are the result of declining financial performance. It is extremely important for the business owner to remain engaged in the business to maximize profitability and, in turn, increase the value of the business during the planning process.
Every business owner will someday exit their business. Planning for this departure from the business will undoubtedly result in maximizing the benefit to the business owner. As a B2B CFO® partner, I can assist business owners in putting together and managing a Success Team™ to plan for the sale or transfer of their ownership. Please feel free to contact me if you have any questions or wish to discuss ways I can be of further assistance.