David Newport, principal of business sales & acquisitions firm Switch Business asks if those baby-boomers really do want to get out entirely?
I've been pondering what the implications would be if baby boomers all tried to exit their businesses at once. It is plausible that most business owners of that generation could seek to do so in the next two to five years.
However, we have found that business owners in
that category are re-entering the ownership market within two years of their initial retirement. It seems there is only so much golf or fishing that someone can do before they get bored.
So, maybe the baby boomers don't want to get out entirely - rather to exit from their existing business. As they say, a change is as good as a rest.
Last year I played golf with a spritely 82-year-old, and over a beer at the 19th hole he told me he retired at 60 with a nice little nest egg that would maintain the lifestyle he and his wife were accustomed to.
His only problem: he never thought he would live this long. Nice problem to have, you might say, but he is running out of money.
We have sold many businesses for 'retirees' in recent years and almost all have, within two years, come back to ask us what we have that would interest them.
Generally, they are looking for something smaller than their previous operation - something they can put a couple of days a week into to keep their minds active. Buying a business is their best option because trying to get a job at their age would be very difficult.
Another popular method of re-entering the market, for owners who have sold and have capital available, is to financially back a relative or a trusted former employee in a business opportunity.
This can take a number of different courses related to shareholding, but in most cases the younger party runs the day-to-day business and the older party offers governance and experience. It's an investment the former owner can be involved in, without the day-to-day hassles.
In a similar vein, a management buy-out (MBO) of the business by existing management, in which the existing owners either help finance the buy-out or retain a shareholding for an agreed period of time, allows owners to back out in a controlled fashion but keep a hand in the business.
I expect there to be many baby boomers exiting their businesses within the next five years, and that they will be back in the market not long afterward.
Each generation is living longer than the one before and is more active with more interests, so it stands to reason that baby boomers will resist fully cutting their business ties in their late 50s or early 60s. Rather, they will look to downsize their business ownership (similarly to the family home once the kids have flown the coop).
This is a good thing - their experience won't be lost to the market, and in many cases their involvement will help bridge the 'finance gap' most believe will occur with the transition of business ownership to younger generations.
David Newport is a principal of business sales & acquisitions firm Switch Business Ltd.
