During the past several years, I've noticed some interesting trends with my clients, who are often male, with a few exceptions.
My clients are younger as I get older (I'm a baby boomer).
And my clients are either the younger generation hiring me to help them take the founder's business (frequently their Dad) to a whole new level…
Or, the older generation is hiring me to help their son and heir apparent to the CEO role to achieve above and beyond what they, as the founder/father, were able to achieve.
Fact: If you were born during the baby boom generation, you are between 54 and 72.
Here's why and how to capitalize on the entrepreneurial trend.
And, if you are in a family business, read on…
Baby Boomer Businesses: What Are They?
Who are Baby Boomers
Baby boomers were born between 1946 and 1964 in the U.S.
Though there is no definitive answer as to what caused the baby boom, historians have put forth the idea that the baby boom was directly related to the end of World War II in 1945.
Once the war was over, the country had an overall optimistic mood and a period of affluence in the U.S. economy.)
Baby Boomers Defining Characteristics
A quick online search shows there are 77 million of us baby boomers in the U.S. And, despite the categorization of Millennials as entrepreneurs, Baby Boomers ages 45 to 64 form businesses at a higher rate than other age groups and 55 to 64-year-olds form businesses at the highest rate of any age group.
As a group, we are viewed as having these characteristics:
Strong work ethic. Baby boomers aren't afraid to put in a hard day of work.
Self-Assured. This generation is independent and self-assured.
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We are Nearing Retirement Age
There are an estimated 12 million businesses in the U.S., According to the U.S. Census Bureau.
Baby boomers own about two-thirds (2/3) of businesses with employees – about 4 million companies.
(Source: California Association of Business Brokers).
And an estimated 83% of them are expected to change hands over the next 5-10 years (Source: Securian Financial).
In fact, according to Pitchbook, a private capital market research firm that analyzes deals in the lower middle market (deal size between $10M and $100M), the number of completed transactions was 70% more in 2015 compared to 2010.
So, according to Dan Roth, Managing Director of IBG Business, wrote:
“Theoretically, if an equal number of boomer business owners attempt to sell their companies each year as boomers turn 65, 210,000 businesses would hit the market each year until 2030.”
Is someone you know ready to retire?
Research conducted by Securian Financial (Small Business Owner Life Stage Study, 2016) revealed some interesting statistics:
72% of business owners with revenues from $250,000 to $20 million have NO EXIT PLAN and are taking no action to exit.
Most business owners will exit within a decade:
29% expect to exit within five years
54% anticipate being gone within ten years
Selling or transferring the business is the most likely exit strategy:
37% want to transfer the business to a family member.
25% want to sell to a partner or key employee.
25% want to sell to a third party.
10% expect to close or wind the business down.
Summary & Conclusions
If the research is correct, 62% of 210,000 businesses changing hands each year will be turned over by baby boomers to a new group of entrepreneurs.
If this is you, you are probably in the 25%-45% who will need to scale your business up so you create value for yourself and other members of your family or team.
Thinking you can buy and keep a business the same will only make economic sense for the seller.
If you are the entrepreneur to whom your founder or father has been looking to transfer his business, are you ready, willing and able to take on this role?
If yes, do you have the processes and systems needed to scale the business?
Do you have a talented group of ‘A' players to guide you in your scale-up?
Do you have a strategy to drive top-line revenue growth with healthy gross margins?