More than 75 million Baby Boomers are poised to retire (part of what has been dubbed the “Silver Tsunami”). Early studies indicated mass exodus of Boomers from the workforce would happen steadily over the next 20 years. Back in 2020, however, I shared my opinion that the COVID-19 pandemic was a wake-up call for many Boomers (those born between 1946 and 1964) who realized being at home wasn’t too bad and that life is too short to work until the very end. Many also learned that unexpected disasters could severely impact the value of their business.
The data is in, and we can see that, indeed, the pandemic accelerated the Boomer generation’s exit from the labor force. According to Pew Research Center, in the Q3 of 2020, about 28.6 million Baby Boomers retired, which is 3.2 million more Boomers than in the same quarter of 2019. “Until [2020], the overall number of retired Boomers had been growing annually by about 2 million on average since 2011 (the year the oldest Boomer reached age 65), and the largest increase was 2.5 million between the third quarter of 2014 and 2015.”
While many are retiring from traditional employment, statistics show that Boomers own more businesses than any other demographic. In fact, according to a 2022 report by Guidant Financial, over 45% of businesses in the U.S. are owned by Boomers. So, while not all of these business owners are going to sell, the acceleration in retirement rate means this decade will likely see shifts in ownership for millions of well-established, profitable businesses. A vast number of business owners have most of their assets positioned in the business itself which makes it even more essential to consider selling – or to at least make a plan.
Avoid These Mistakes
Selling Too Late
Too often, a business owner will decide to sell their business when it is too late, even to the point that it is not sellable. Seizing an opportunity matters more than waiting for the “perfect timing.” Focus on solidifying your retirement and leaving a financial legacy for your family now. Think about what you are retiring to, not from.
Founder’s Syndrome
Because business owners commonly have their personal identity wrapped up in the business, they struggle to step away. But the inability or unwillingness to let go can drive the business into the ground and leave you with nothing to sell. Sell when things are going well. As soon as your ability to run the company declines, the business starts to decline with it. Buyers and banks will wonder where the bottom is, and they won’t want to pay full price.
Losing Equity
A business owner should consider their business an investment just like stocks, bonds, and mutual funds. Transitioning equity into cash at the right time with the right advisor’s help can make a tremendous difference. If you’re approaching the retirement mark and feel it might be time to find a successor for your business, you’re not alone. We can help you prepare for the most important transaction in helping to secure your future. Contact us today for a no-cost, confidential valuation to see where you stand.