Exit/Succession Planning for Baby Boomer Session Title … · 2019. 10. 28. · Exit/Succession...
Transcript of Exit/Succession Planning for Baby Boomer Session Title … · 2019. 10. 28. · Exit/Succession...
Session Title
Presented by: (First and Last name of presenter(s)
H O S T E D B Y :
Exit/Succession Planning for Baby Boomer Business Owners
Beating the Boomer BustPart I
The Entrepreneurial Generation
Why do Baby Boomers Own So Many Small Businesses?
Analyzing the Boomer Bust“I don’t predict the future, I just look at what has already happened and determine the inevitable consequences.”
Peter Drucker
The Baby Boom started 60 years ago. It’s effects are still reverberating
Boomers Own Businesseso USA population: 318 milliono Baby Boomers: 78 million (25%)o 2-500 employee businesses: 9 milliono Boomer owned: 5.5 million (61%)
Why are Boomers 2 ½ times more likely to own a
business?
Start With the Numbers
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Births in Millions
1945: GIs returning from WWII start
the Boom
1965: 40% of
Americans are under 21
Add New Technology
o Television becomes the center of the homeo Marketers’ messaging reaches millions
Walt Disney’s Geniuso Bypass parents and market directly to Boomerso 1955: Disneyland opens/Mickey Mouse Clubo 1959: 25,000 pair of Mouseketeer ears sold daily
With…• No Internet• No 800 numbers• No credit cards
Everyone Shares the Same Experiences
Regional and ethnic differences blur.
Boomer moments are America’s moments.
Watch the Economy Grow
Suburbia booms A car in every garage
A rising tide lifts all boatsNew schools, highways, stores, houses
More consumers, more jobs, more wealth
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College Graduations
1965: Boomers
start turning 21
o US workforce goes from 6% to 25% college educatedo 1970’s employment grows 53% faster o Colleges and corporations are overwhelmed
Boomers Go to School
Boomer Driverso Scarcity
o Not enough classroomso Not enough collegeso Not enough jobs
o Formula for Successo Work hardero Prioritize career
Everything is a competition!
Boomers Needed Businesseso They were raised to expect it all
o Educatedo Consumeristic
o Success is defined by:o Careero Lifestyleo Possessions
Boomers are what they do, and are what they own!
Boomers go into Business
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Business Start-Ups1975: First Boomers turn 30
By 1986 business formations are 250% of
10 years earlier
Franchisingo “Business Format” franchising
The promise: “If you are willing to work very hard, you can have an executive income without climbing the corporate ladder.”
Chasing Successo Women join the workforce
o From 1950 to 2000, a 300% increaseo Less time at homeo 1984: “Work/Life Balance” is coined
Boomers Fuel Franchising
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New Franchises in America BoomersTurn 30
In five years, new franchise unit sales grow from 3,000 to over 20,000 annually
Outsourcing The Home
o Find other self-employed Boomers to:o Babysit (day care)o Do homework (after school care)o Coach (organized sports)o Cook (take out, drive through)o Home care (lawns, repairs, cleaning)
Boomer Serving Boomers
o Boomers free time for producing income by contracting to other hard-working Boomers, who
o Free time by shifting their chores to other hard-working Boomers, who…
o Hire other Boomers.
What Happens Next?
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US Labor Force Growth
2010- First Boomers turn 65
1985- Last Boomers turn 20
A 50 year surge is coming to an end
Exiting A Small Businesso Millions of Boomers are retiringo Most are planning on equity
from their businesso What if it isn’t there?
(In the fourth quarter of 2012 )“For the first time, baby boomer retirement was the number one reason driving business sales.”
Pepperdine University/IBBA/M&A Source : Market Pulse Survey 2013
The Exodus
o 5 million Boomers are exiting
o Buyers have more choices that do not require:o Long hours
o Investment
o Risk
Forget the fiscal cliff, the sequestration cliff and the entitlement cliff. Those are just symptoms. What America really faces is a demographic cliff.”
– The Wall Street Journal, February 2, 2013
Part IIThe Tsunami
As the Boomers Exit, Where Is the Next Generation of Small Business Owners?
The “Baby Bust”
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Births in Millions
1965: Boomers turn 20, but delay
having families
1990: Birth rates again
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“What Americans have to understand is that this country reached its demographic peak ten years ago.” David T. Beers, Standard & Poors Head of Sovereign Credit ratings on the downgrading of the
U.S. credit rating to AA+, August 7, 2011
The Seller’s Tsunami
o Demographic: o Fewer peopleo Slower growtho Oversupply
o Psychographic: Generation X is less inclined to entrepreneurship
o Sociographic: Big business can outbid small business for workers
Demographic
From 2018 to 2023 Retiring Boomers will outnumber GenXers reaching ownership age by 4,000 A DAY!
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Boomers turn 65
Xers Turn 45
Births in Millions
Psychographic (Attitudes)
o My life outside of work defines meo Business is secondaryo Don’t mix job and family
o Too much work is bado Time for my “real” lifeo Money isn’t that important
(and I’ll probably inherit a bunch from my boomer parents anyway…)
Sociographico Corporate America is replacing the Boomers
o Jobs are being tailored for scarce workers
o Entrepreneurs can’t match:o Limited hours
o Benefits
o Telecommuting
o Flex time
o Personal leave
Different Expectationso Boomer Entrepreneurs
o Work is successo What I do is who I amo Delayed gratification
o GenX Workerso Average 7 career shiftso I am not my jobo The future is uncertain
Beating the Boomer Bust
• The Seller’s World– Flood of businesses
coming to market– Most are not suited to
GenX buyers
• The Buyer’s World– More alternatives– Little or no savings– Low tolerance for risk
Cold, Hard Facts
o 5,500,000 Boomer Businesses o Brokers sell 1 out of 5 listings
o The other 80% will…o Create their own exit plan, or
o Close
Building Your Exit Plano Internal
o Employee(s)o Family
o Externalo Third party saleo Tailored to a GenX buyero The sooner you start, the
better
It’s THE most important financial event of an owner’s lifetime!
Triangulation
Part IIIFive Roads to Exit
Sooner or later, every owner exits his or her business.
Exit Realitieso Boomers will exit over 5 million businesseso Not all will succeed in sellingo Preparation = Choices
Option 1
Ignore It
You can plan for the most important financial event of
your life, or you can choose to have it be a surprise
Option 2Wait and Watch
o Knowledge is powero Be prepared to sell
o Track key indicatorso Financial markets
o Industry Trends
o Listen to any offers
Option 3 Planned Liquidation
o Your company can’t run without you
o You don’t have a saleable modelo Too many hours
o Too much risk
o You don’t need the equity value
Option 4Prepare for a Competitive Sale
A saleable companyü Is in the top quartile of its industry
ü Has documented systems and processes
ü Shows strong revenue and profit trends
ü Includes post-sale management
Option 5Develop Your Successor
o Train and finance while you maintain control
o Valuation based on need, not negotiations
o Choose your exit date in advance
Exit Planning Timelines
o Close Down: 1 yearo Sale to a third party: 2-3 yearso Employee successor: 3-5 yearso Child in the company: 3-5 years
The Boomer Fantasy: “I’ll find a younger person who is just like me!”
You Can’t Change Historyo Historical birthrates are fixed in stoneo Every owner will exit his or her business
Boomer owners need exits from 750 small businesses a
day
Planning – Coaching – Assessment – Development – ImplementationFor Business Owners in Transition
www.exitmap.com
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