Much has been written about the fact that the Baby Boomers are now beginning to retire. What hasn’t been discussed much is what will happen to those boomers who own businesses and the difficulties they’ll face when they decide it’s time to sell.
Just to put things in perspective, it is estimated that there are upwards of 111 million boomers in Canada, the US, the UK and Australia combined. Although there doesn’t appear to be any actual census numbers, it is again estimated that boomers own 16- 50% of all businesses. If one assumed the lower end of the estimate of 20%, that translates into a potential 20,000,000 businesses coming to market between now and 2022 in these four countries. That’s over 5,000 businesses a day, every day for the next 10 years. If you think you have competition now in running your business, just wait until you try to sell it because you’ll most likely be smack dab in the middle of a buyers market. Granted many of the businesses cannot or will not be sold because they are just too small or are based on personal services with limited appeal.
With all the noise on how ill prepared baby boomers in general are for retirement, I can only assume the boomer business owner is no better off. Far too many boomers are banking on the sale of their businesses to fund their retirements and have not made any alternative plans. For the owners of better run businesses this may be a safe bet, but I would still temper the expectation given the impending glut of businesses coming to market.
So if you’re a boomer planning on retiring on the proceeds from the sale of your businesses, here are three things you need to do this year to start the process;
Get An Evaluation
Quit guessing at what you think your business is worth, have it evaluated. An evaluation is expensive, but it does give you a reality check and provides a valuation benchmark. In many cases, it will serve to highlight any deficiencies you may be ignoring that will negatively impact the saleability of your enterprise. Additionally, having a formal evaluation in hand at negotiating time will give you the confidence to justify your asking price. The money spent will more than be justified by allowing you to set realistic expectations and increasing your odds of selling your business.
Strengthen your balance sheet
The easiest way to justify your asking price is to maximize the profitability your company. Pledge to eliminate or significantly reduce all unnecessary expenses. Although this should be done regularly, we are all guilty of not paying attention to some of the minutia and before you know it you’ve incrementally increased your overhead by a few percentage points. Not only is your company less profitable while you still own it, but it will also affect your final selling price, so you get hit twice.
Get out of your own way
I’ve said this a hundred times. Most business owners can’t get out of their own way. A business that is dependent on the owner is far less valuable than an organization that can operate on its own. As an owner you need to let go and let your employees pick up the slack. If they can’t, train them and do it now! Don’t know how or where to start? Begin today by making them provide the solution to the next problem they bring you. Ask them how they would deal with the issue. If it’s close enough, let them execute it, if not, ask them a series of “what if” questions to get them used to thinking about the impact of their solution on the company and on the client. Of course this is not easy or painless, but then again you should have been doing this all along!
It has been said that the Baby Boomers have enjoyed more successes and better lifestyles than previous generations. So, if you’re Boomer owner and you hope to enjoy your retirement, you better start planning to sell your business now, because hoping and praying is not a strategic initiative.
Copyright © Greg Weatherdon 2012
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