Workforce experts have called it the Silver Tsunami. As baby boomers reach retirement age, a big hole is expected to open up in available, skilled workers.
But it’s not just manufacturing and industry that will be affected by the boomers -- individuals born between 1945-1963 -- privately-owned businesses are also facing a crisis. Who will be the next generation of entrepreneurs when those baby boomers are ready to leave the business they may have owned for decades?
In 2013 the Exit Planning Institute, the national professional association for the exit-planning industry, issued results of a survey that showed 76 percent of business owners, mainly boomers, were looking to sell their business and retire within 10 years.
That was seven years ago. Has the possibly economy-crippling mass exodus started to happen?
No, not really, said Jan Graybill, CEO of Legacy Planning Partners a financial planning firm in South Whitehall Township.
Instead of a tsunami, he said there’s been more of a trickle in boomers selling their businesses.
“From my own business experience in the past five years I’ve handled about two to five business sales a year,” he said.
While that isn’t an epic exodus, he said five years ago he wasn’t really seeing any boomer business sales.
Joseph Bubba, partner in the Allentown law firm of Fitzpatrick Lentz & Bubba said the process has definitely begun.
“I think it’s only the cutting edge of the tsunami, as you called it. I think it’s going to start really happening in the next five to eight years,” he said.
So those business sales, they said, are still on the horizon, and we’re not out of the woods yet.
Bubba noted that his firm has a March seminar planned on exit planning, and it was easy to put together an invitation list of business they thought would benefit.
“So many of us know contemporaries that are at that point where they’re ready for the next generation to take over,” Bubba said. “Just about any named business you can think about in the Lehigh Valley, the name behind that business will likely be looking to sell.”
Graybill noted that when the Exit Planning Institute repeated its survey in 2019 it found that 70 percent were still looking to sell within a decade, with a third of those looking to sell within five years.
Graybill said his concern is that those aging entrepreneurs are still looking to exit their businesses, they simply aren’t planning for it.
He said he understands that making the declaration that you’re leaving behind a business you’ve spent your lifetime building up is difficult.
“To them it’s like dying. You don’t want to plan your funeral, but that’s what it feels like to the business owner,” he said.
The problem, he said, if those business owners are waiting until the last minute to start the selling process, which he thinks many are, they may selling themselves short on their business’ value.
“If someone had interest in your business you need to be ready,” he said.
Bubba said they like to call it “dressing the bride up for the wedding.”
Simply put, he said these business owners need to stop thinking about who their customer will be and start thinking about who their buyer will be, and that means making changes to the business that will attract the latter.
“There are companies that don’t even understand their own balance sheet and how that impacts your sales price,” Bubba said.
Those considering selling their businesses need to start planning ways to build the value well in advance so that they have a more marketable product.
Graybill said right now it’s a sellers’ market for businesses in the $2 million to $4 million range, so retiring businesses owners looking to sell can get a good price if they have an attractive business.
“But once that trickle starts to be more of a rainfall it’s not a sellers’ market any more. It will be a buyers’ market,” he said. And he warned those who haven’t worked to create a more valuable, attractive business might find themselves with no takers.
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