We’ve all read the headlines and heard the talk. "Baby boomer business owners are going to be exiting in record numbers. The tidal wave will be immense. Get ready for the wave." But guess what, it’s not happening -- at least not yet. Don’t get me wrong, eventually every boomer business owner will leave their company, but I don't think the exodus will look like the headlines expect.
Boomers are roughly defined as anyone born between 1946 and 1964, meaning today they are between 58 and 76. Assuming boomers are equally distributed among that age range, close to half of them are under the age of 65. It is quite reasonable to expect that they are still actively operating their businesses. But, what about those over the age of 65? Shouldn’t their mass exodus from ownership been felt by now? Not so fast.
To understand why baby boomers over the traditional retirement age of 65 are holding onto their businesses, it’s important to dig a little deeper into the psyche of today’s baby boomer business owner:
- Many are in Recovery Mode: Whether in actual dollars and cents, or purely in their minds, baby boomer business owners were strongly impacted by both the repercussions of the covid-19 pandemic and the recent economic turmoil. While the impact on businesses and retirement accounts has varied, the emotional impact of the pandemic and the market has put them in a mode of recovery, which plays out by them holding on to their business.
- Unknown Personal Future: Baby boomers are uncertain about their personal futures. How long will they live? How much will that cost? Will there be any unforeseen expenses? How much money is needed for retirement depends on what the expenditures are for a person to maintain the lifestyle they are accustomed to, though health must also be factored in. This can be tricky, especially when considering advancements in medical care coupled with rising costs. All of this reinforces baby boomer's commitment to earning and saving as long as they can. Again, this often means holding on to their businesses.
- Business Owners are “Doers”: You know the type. They can’t sit still, always need a project, and are busy-busy-busy. When they’ve mentioned retirement in the past, you’ve thought, “Yeah right, they can golf or fish for maybe two days before they get bored.” That’s true. These entrepreneurs need someplace to go every day and something to work on. There's nothing better for that than the profitable business they currently own. Just because their employee counterparts retire at age 65, don't expect Baby Boomer business owners to hang it up simply because they hit a certain age.
So, what does this mean to the marketplace? What should all these baby boomer business owners be doing? The popular belief recently seems to be that if they take their business to market, it will be lost in a sea of others for sale, and buyers will have a feeding frenzy as they buy business after business for bargain prices. Here’s the reality check:
- Fewer baby boomer business owners going to market than anticipated
- Businesses with good cash flow are in high demand
- Premium prices are being paid for quality businesses
The above-mentioned reasons boomers are holding onto their businesses are very real. You will need to address each to make sure you are ready to sell. Do you have enough money saved? Do you have a purpose for life-after-business? If so, you might be in a perfect position to capitalize on a strong seller’s market, the type we might not see for many years to come. Now might be the best opportunity you will have to maximize your value as you sell.
Takeaways:
- If you are a baby boomer business owner who can walk away from your business, now might be the best opportunity to maximize your value as you sell.
- The anticipated wave of baby boomer business owners selling their companies has not materialized.
- Many baby boomer business owners will hold on to their businesses as long as they are physically and emotionally able.
By Andy Kocemba