For years, studies have projected a wave of small businesses will change hands in the U.S. as a “silver tsunami” of aging baby boomer entrepreneurs retire. However, the COVID pandemic, high inflation, rate hikes, and other economic disruptions and uncertainty have caused jitters for aspiring buyers and sellers alike.
Now, evidence shows the “Great Boomer Business Sell-off” is underway and experts say it is far from over.
There are more than 12 million privately owned businesses and more than 70% are expected to change hands between 2024 and 2030. A study from Forrester determined that younger generations, those born in 1980 or later, make up the majority (64%) of small business buyers.
Of the business owners over age 65, six out of ten (60%) are open to seller financing and using the profits from their business for the next generation of owners.
For sellers, the crucial decision looms: sell their cherished business or find a capable successor. The choices are tough and have a distinct bearing on the seller’s retirement future. Yet, only 10% have an exit strategy.
Selling the Legacy:
There’s no denying the allure of a hefty payout. Years of dedication deserve a comfortable retirement. Selling the business allows the seller to maximize his financial return and finally step away. However, this path requires careful planning.
- Valuation: Understanding a business’s true value is paramount. Hiring a professional appraiser can ensure a fair price.
- Finding the Right Buyer: Not all buyers are created equal. Sellers should seek a buyer who understands the business and appreciates the legacy. Perhaps a local entrepreneur with a passion for the industry?
- Negotiation is Key: Don’t underestimate the power of negotiation. Sellers should have a skilled team by their side to ensure a favorable deal.
Passing the Torch:
Letting go can be hard, but for some Baby Boomers, the emotional attachment to their business runs deep. An option to finding solace might be in passing the reins to a worthy successor. This option allows owners to ensure their legacy continues.
- Identifying Talent: Finding the right person is crucial. Look within – has a loyal employee shown leadership potential? Perhaps mentoring a younger family member will foster a smooth transition.
- Succession Planning: Don’t wait until the last minute. A well-defined succession plan outlines the process, roles, and responsibilities involved in the transition.
- Mentorship Matters: An owner’s experience is invaluable. Providing ongoing mentorship ensures the new leader has the guidance and support needed for success.
The Choice is Yours:
There’s no one-size-fits-all answer. The decision to sell or pass the torch depends on individual circumstances, financial goals, and emotional attachment to the business.
- Financial Security: Selling often brings a larger upfront sum, boosting retirement security. However, a well-structured succession plan can provide ongoing income through profit sharing or consulting fees.
- Legacy: For some, passing the torch is about ensuring their creation thrives. Witnessing the store’s continued success under a new leader can be incredibly rewarding.
- Finding the Right Fit: Ultimately, the best choice considers both financial and emotional well-being. Don’t be afraid to seek professional help from financial advisors or business consultants.
The Final Chapter:
Whether an owner chooses to sell or pass the torch, the decision should be a source of pride. The years of building a successful business bring the opportunity to write a satisfying final chapter with a legacy that can live on, either through a substantial financial reward or through the continued success of that cherished business.
At Business Finance Corporation (BFC), our goal is to help our clients achieve success by providing a service that turns hard-earned receivables into early cash. With cash in hand, businesses can take advantage of expansion opportunities, pay bills on time, purchase supplies, hire more staff, or update technology.
If you are thinking about retiring or selling your business, your accounts receivable may provide a source for partially funding a buyout. At BFC, we can show you how your accounts receivable can become cash for a transition. For more information about the benefits of Invoice Factoring, go to https://bfc.vegas/invoice-factoring/benefits-of-invoice-factoring/ or speak to me directly by calling 702-947-3800. Let’s talk!
Your Partner in Success,
David Cabral