We all know that the Baby Boomers have begun turning 65, the traditional retirement age. Over the next 18 years, all the Baby Boomers will hit that milestone.
While not everyone wants to retire at that magic age, it is a reminder that time is ticking by and that perhaps plans should be in the works to allow for retirement when the individual is ready.
Business owners are not exempt from this issue. In fact, they probably need to plan more carefully than most people so they can effectively exit the business when they decide the time is right, or when circumstances such as health concerns compel their exit. Yet, most business owners seem hesitant to discuss their exit strategy or to plan for it.
They may have their reasons for avoiding the topic, but business owners won’t be able to avoid disaster unless they plan for the succession of their businesses. Here are a few points for the Baby Boomer business owner to consider.
1. Most Baby Boomers grew their careers at a time when long hours and “nose to the grindstone” effort reaped the biggest rewards. Likely successors, being from a different generation, may not have the same mentality about work, and the Boomer may see this as a weakness. The business owner may surmise that the successors won’t put in the effort necessary for success and use this to delay the selection of a successor.
2. The business is likely one of the Boomer’s greatest financial assets. Figuring out how to extract the value from the business can be a challenge. In many cases, business owners may find they are dependent on the business’s continuing success to fund their retirement. That can be scary. Planning far enough ahead allows time to put buy-out plans in place. That will help the successors and the business owner in the long run.
3. Finding a buyer may be difficult. If business owners decide that selling the business is the best option, they may find themselves competing with many others in the same boat. The numbers of people reaching retirement age at once mean that many people will be trying to sell their businesses at the same time. That may be better for the prospective buyers than the prospective sellers. When supply is greater than demand, prices fall and terms favor the buyers.
4. Execution takes time. Even if the business owner recognizes the need to plan for succession, the process is a long one. Not only does it take a substantial amount of time to examine options and decide on a path, it takes even more time to execute effectively. Selecting the right people for senior positions, training, transferring duties, and so on don’t happen overnight. And, the business doesn’t stop running while all of these “extra” issues are addressed. It is important to develop a realistic plan and timetable. It is sometimes helpful to have a consultant, coach or guide to help keep you on track and hold you accountable. The process will not always be easy, and the temptation to quit will sometimes be strong. The commitment to succeed with succession must be just as strong.
5. The first choice might not work out. Many business owners experience disappointment when their first successor choice doesn’t work out. Sometimes the successor decides to leave, and sometimes the business owner realizes that the choice was not a good one. Either outcome should not lead to despair. In every circumstance, the business owner can learn something that will make the next time better. This is, however, just another reason not to wait until the last minute to start. The process will likely take longer than you expect.
6. Baby Boomers live to work, and entrepreneurs are often consumed with their businesses. Put those two factors together, and you’ll find someone who may have very few outside interests. The Boomer business owner may not have anything to retire to. It can be scary to think about having no office to go to, no customers to call and no problems to resolve. Without a plan for what’s next, many business owners will have a hard time letting go.
While these issues are serious, they can only be solved by action – and the sooner, the better.