In one of our recent blogs, we discussed that with 10,000 baby boomers are reaching retirement age every day, the United States is going to see the largest intergenerational transfer of private businesses in our country’s history.
You might assume that millennials or Generation X’ers will take the place of baby boomers as America’s entrepreneurial standard bearers. They are at a prime age to do so being in their mid-twenties to mid-forties.
However, it’s not that simple. Instead, many boomers are discovering that it’s difficult to find younger entrepreneurs to sell their companies to – in fact, many are finding it easier to stay in business than it is to get out.
Why the Slow Transition?
1. Millennials are neither old enough nor as entrepreneurial as boomers.
Despite the constant chatter about millennials’ proclivity for tech and their desire to work at startups, according to Federal Reserve Data, they are actually turning out to be the least entrepreneurial generation in recent history.
It’s likely that the Great Recession of 2008 had a significant impact on their economic psyche and their massive accumulation of student loans has delayed their financial growth.
Whatever the reason, as time has passed, it has become evident that a large portion of the highly populated millennial generation is either unwilling or unable to acquire boomer-owned businesses as is necessary. This may change with time, but that does not satisfy the current demand for buyers.
2. Generation X’ers are not nearly numerous enough to fill the gap.
But what about the next-elder generation, Generation X (born between 1965 and 1980)? They are beginning to fill C-suites across the country, have a significant impact in the private equity markets, and are responsible for more startups than millennials.
While they’re proving to be a much more entrepreneurial generation than their juniors, the simple fact is that, based on the numbers, there aren’t enough of them. There are more than 10 million fewer Gen X’ers than boomers and 15 million fewer than millennials.
3. Small business owners have an inherent value that’s difficult to replace.
Many small businesses are difficult to sell because of the dependence the business has on the owner. Their knowledge, personality, contacts, and experience are what make the business successful. That is an extraordinarily difficult thing for another person to replicate.
4. Some boomers are unable or unwilling to retire.
There are those boomers who aren’t selling their business simply because they need to work longer. The relatively large impact that the Great Recession had on the retirement savings of baby boomers has caused a need to elongate their careers to make up savings. Additionally, many boomers who have poured decades of their life into building a company find that they just don’t know what else to do with their time, and as a result, struggle to “retire”.
The Transition is Essential
The economic necessity of established small businesses throughout the United States is undeniable, but aging entrepreneurs recognize that they can’t do it forever. So, how can boomer business owners overcome this generational slowdown in entrepreneurship and find an exit option that pays for their retirement?
Thankfully, there are a surprising number of options, including strategic buyers with strong balance sheets, private equity firms seeking to deploy their capital, and family office investors looking to exit a long-term investment strategy. Advisory services can help construct an exit strategy that includes these types of well-qualified buyers and that meets business owner’s needs.
Simply relying on the next generation to be there when it comes time to retire is a risky strategy. If you are a baby boomer thinking about selling your business but don’t know how to make it happen, contact the Symmetrical team today and we can help you build a strategy that enables you to confidently execute the transfer of your business.