Small Business Saturday® is November 24, 2017. The Small Business Administration’s page celebrates this modern marketing push of Small Business Saturday aimed at driving business to the economic engines of America. But retail small businesses are just a subset of a much larger segment of our economy. The SBA estimates that there are roughly 28,000,000 small businesses in the US. The SBA defines a small business as an enterprise with fewer than 500 employees. There are estimates that as many as 12,000,000 small businesses are owned and operated by Baby Boomers, with approximately 4,000,000 of this number with operations large enough to be potentially transferable. So, what is one of these 4,000,000 Baby Boomers to do as he or she plans for the golden years of retirement? Hold, fold or sell?
Well before reaching the age of retirement, Baby Boomers need to consider an exit strategy from their businesses. But how does a business owner know if the business is sustainable without him or her? Will the company fall to pieces when he or she retires? Is the business salable or is it simply a reflection of the Baby Boomer owner? What will the Baby Boomer’s role be in the business going forward? All of these questions make even thinking about planning for the future a nightmare. But it gets even more complicated, since recent studies show that many business owners cannot sell their businesses. Check out this Forbes article. But let’s hope for the best and plan for an exit either by a sale or some other succession plan options.
Baby Boomer business owners should set clear business and personal objectives before creating an exit or succession plan. These objectives might include consideration of financial needs and lifestyle choices between now and death (yes, planning for retirement does require thinking about death), keeping the business local, taking care of employees, or providing enough seller-financing for the owner’s retirement if the Baby Boomer has not saved enough outside of the business. What is critical to this sort of goal setting is for the Baby Boomer to understand what makes him or her excited about the business they have built – financial reward, a legacy or an opportunity for others to continue to serve a treasured client base.
When a Baby Boomers business is a professional service business – such as accounting, dentistry, financial planning, counseling, consulting – the Baby Boomer owner represents much of the business’s value. Professional service businesses are not as easy to sell or transfer as a business with inventory and a store front. That does not mean Baby Boomer professional service providers cannot “sell” or transfer their businesses; it means the path to exit requires more of a plan to transition than preparing for sale. Many times, the better option is to create a plan to pass the business on to a promising employee or family member who knows the company’s culture and clients. The Baby Boomer business owner should not shy away from this more nuanced path to transferring his or her business.
Without a path and a plan, a business will fail and fold. We can predict the same fate for a Baby Boomer’s business if he or she does not have a plan and a path toward transitioning the business.
So as Baby Boomer business owners ponder the fate of their businesses, the iconic refrain from Kenny Rogers’ 1978 hit song The Gambler rings true:
You got to know when to hold ’em,
Know when to fold ’em,
Know when to walk away,
And know when to run.
You never count your money
When you’re sittin’ at the table.
There’ll be time enough for countin’
When the dealing’s done.