Recently I posted a piece on what the possible implications were if the ‘Baby boomer” generation all tried to exit their businesses at once. I received a few comments on this post stating that maybe I had overstated the problem for my own ends. Any feedback is good feedback I feel because a blog post is only an opinion and you can’t expect everyone to agree with you all the time.
It did get me thinking though and that is always a good thing. It is entirely plausible that the majority of business owners who are of the baby boomer generation could want to exit their current businesses in the next 2-5 years. But what we have found more and more common with business owners of that generation, who have already exited, is that they are re-entering the business ownership market within two years of their planned retirement. It seems there is only so much golf or fishing that someone can do before they get bored with it.
So maybe the baby boomers don’t really want to exit the market entirely more just to exit from their existing business. A change is as good as a rest they say.
I played golf with a spritely 82yo mid last year, and having a beer with him at the 19th hole, he told me he retired at 60 with a nice little nest egg that he and his wife could live comfortably on in the lifestyle they were accustomed too. His only problem is that he never thought he would live this long. Nice problem to have I hear people say, but he is running out of money.
We have sold numerous businesses for ‘retirees’ in recent years and almost 100% of them have come back to us within 2 years of selling their business and have asked us what we have that they would be interested in. Generally they are looking for something a little smaller than they previously had but really looking for something that they can put a couple of days a week in to keep their minds active. Buying a business is really their only 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 their business and have capital available, is for them to financially back a relative or a trusted former employee into a business opportunity. This can take a number of different courses relating to shareholding but in most cases the younger party runs the day to day business and the older party offers governance and experience to the business and has a investment that he/she can be involved in, but with none of the day to day hassles.
In a similar vein a Management Buy Out (MBO) of the business by existing management where the existing owners either help finance the buyout or retain a shareholding for an agreed period of time similarly allows owners to back out in a controlled fashion but still keeping a hand in the business.
To conclude, we think that there will be a large number of baby boomers exiting their existing businesses in the next 2-5 years but we also feel that a significant number of those, after a settling down period with re-enter the market in some form. Each generation is living longer, are more active, have more interests so it seems logical that the baby boomers won’t cut ties fully from the business market in late 50’s or early 60’s, but more likely will downsize their business in a similar fashion to the family home once the kids has flown the coop. Personally I think this is a good thing because their experience won’t be lost to the market and in a lot of cases will aid bridging the possible ‘finance gap’ most believe will be evident in the transition of business ownership from baby boomer generation to following generations.