John F. Dini, a consultant and prolific blogger, is sounding an alarm for baby boomer business owners. As most know, the boomers are a huge anomaly in the population stream. They are significantly larger in numbers than any generation that came before or after. In addition, they are disproportionately represented on the entrepreneurial scene. Dini reports they own about two-thirds of all small businesses with employees.
Why is that cause for alarm? Because, beginning in 2018, the youngest boomer will be age 54. Eight thousand boomers a day will turn 65 while only 4,000 Generation Xers will turn 45. Xers will be reaching the age when most begin to think about owning or buying a business – at only half the rate that boomers will be reaching retirement. That basic statistic doesn’t consider Xers driven to entrepreneurial ambitions will almost certainly be less in proportion to their numbers than were the boomers. As a result, there will be less than half enough Xers to buy the available boomer businesses.
Here’s the problem: Who will buy all those boomer businesses? If you are a boomer who is counting on a buyer for your business in order to enable you to retire, you may be in for a rude awakening.
Even if you don’t care about a buyer for your business (Perhaps you are leaving your business to your children), you should think about other effects the Gen Xers are creating. For the first time in the history of this country, the Gen X population is smaller than the population that preceded them – smaller by 10 million or about 11 percent of the boomer population. What will that 11 percent reduction mean for your market? How will that affect your competitive environment? What will be the effect on the economy when more than a million businesses disappear and employees lose their jobs because the owners can no longer run the business and have no prospects to sell it?
What should or can you do if you realize the validity of the scenario presented in this column? Begin by realizing you are ahead of the pack if you begin planning your exit today. What can you begin to do now that will make your business more attractive to a business buyer? Remember, business buyers aren’t going to disappear. They will just be fewer in number and more discriminating in their decisions. Begin to study the different types of buyers, and research what it will take to make your business more attractive to those who will value it the most.
Start today – assess the status and value of your business. Don’t kid yourself during this process. Be candid. That will almost certainly require an independent, outside opinion. Once you know where you are, develop a plan for increasing value and salability. The processes to do so are well-known. You must start now if you are to get ahead of the crowd.
A successful sale will almost certainly be the largest single financial transaction of your life. Failure to sell will quite likely devastate your plans. What will you do next?
Bowser@BusinessValueInsights.com. Dan Bowser is president of Value Insights, Inc. of Durango, Chandler, Arizona, and Summerville, Pennsylvania.