SBCA

Surviving the Big Boomer Business Bust

By on June 8, 2016

According to PricewaterhouseCoopers, over the next ten years approximately 50% of all owners of small and mid-sized companies will exit their companies. Some estimate that the exit rate will be closer to 75%. Retiring baby boomers are driving this massive exodus from the marketplace. Unfortunately, of the small business owners who exit their business, only about 1 in 5 owners are successful in selling their company. The remaining 80% of business owners are closing their doors with a big fat zero for all their hard work!

Why is this happening? Reality is that not every business is saleable. Additionally, there are a limited amount of business buyers who have lots of businesses to choose from, and they are shopping for the best return on their investment. In the business acquisitions world, over the next few years it will likely become a buyer’s market.

Business owners are reluctant to create an exit plan; it seems like planning for your own funeral. They are afraid of what life will be like without their business, so they do nothing. However, the truth of the matter is that there is opportunity in selling. This is an opportunity to cash out now, and enjoy the fruits of their labor. This is an opportunity to try something else; another business, ministry, travel, time with family.

Below are some things you can do to increase your chances of selling for big bucks;

  1. Create an Exit Plan. You know the drill; “those who fail to plan, plan to fail.” The problem with failing to plan is obvious. Hire an Exit Planning Coach.
  2. Plan Three to Ten Years in Advance. Most experts say that you should have an exit plan when you start a business. Three to ten years is the minimum time to prepare.
  3. Sell From a Position of Strength. You can command top dollar when your business is strong. Unfortunately, many owners wait until an economic turndown, a health crisis, or burnout forces them to sell from a position of weakness.
  4. Know the Value of Your Business. Every business owner should get an annual valuation on their business; this is the best indicator of a company’s performance.
  5. Get Revenues and Profits up. Your business should be growing; both top line and bottom line. Become the number one or two largest business in your market.
  6. Develop Management Succession. If you’re the only one who can run your business, who will a buyer have to help run the business after you leave?
  7. Maintain Confidentiality. This is critical to the health of your organization. If your competitors, customers, employees or vendors find out that you are selling, this could mean disaster for your company!
  8. Keep Focused on the Business. Don’t let your business performance decline because you’re too focused on the sale of your business. Work on your business as if you don’t plan to sell it.
  9. Get Help From Professionals. You will need an Exit Planner, a wealth planner, a CPA, and a tax attorney on your team.
  10. Get Your Books and Records in Order. Hire a CPA to prepare your statements; this will give the buyer confidence in your financials. Also get your legal documents in order.

Even though only 20% of all small businesses are selling, it is possible to get yourself into that group. But it is going to take some planning and some more hard work to get yourself there. You should start today!

About Alan Melton

One Comment

  1. S Garrett

    November 9, 2017 at 4:21 am

    Very well written and well thought out article!

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