Since their birth, between the years of 1946 through 1964, baby boomers have been described as “the pig in the python.” At each stage of their development from primary school, home ownership, and through their professional lives, boomers strained existing resources because their numbers are disproportionately greater than prior generations. This remains true for business ownership.
Here are facts about this market segment you need to know:
Buyers Market – Today 66% of all businesses are owned by baby boomers, representing almost 4 million companies. Inc. magazine estimates that 65% to 75% of small U.S. companies will likely hang up a “for sale” sign during the next 5-10 years. This means that 2.6 to 3.0 million small businesses will be for sale during the same time period when you may want to sell your business.
Excess Supply will Suppress the Value of Your Business – The business market functions like other markets. When there are multiple companies available (supply) to each buyer (demand), the buyer is in a better position to negotiate a lower valuation and more favorable terms, which could cost you millions. Some companies will never find a buyer, which may cause them to liquidate.
Create a Sellers Market – Use Strategic Financial Management to create a seller’s market. Financial management is the process of planning, budgeting, managing monthly operations, and year end work through the annual cycle to accomplish business objectives. Strategic Financial Management adds:
- Calculating industry benchmarks to identify opportunities from an external, comparative perspective
- Developing multi-year forecast that provides visibility into profit, cash, asset, and liabilities
- Using the synergy analysis to examine alternatives and scenarios that achieve required objectives and place your business in the top percentile
- Reviewing your business valuation at least annually
- Employing exit planning as your strategic guiding light
Being best of class fosters a seller’s market for your business even when there are others on the market at the same time. Starting early gives you time to address business fundamentals deliberately and effectively. Using Exit Planning as a strategic guiding light flags fundamentals such as customer diversification, scalability, how the business will perform without the founder, employee well-being/development, improving sales and cash flow, and selecting the transaction team who executes for you.
Take the Next Step
Request your personalized Business Competitiveness Report by using my online system to schedule an introductory call, or send me a message in LinkedIn. This report benchmarks your business to competition, provides a valuation, enhances visibility by forecasting several years out, and includes scenarios to inform strategic decision making.
Kirk W. McLaren, CFO, MBA, CPA, is an accomplished and dedicated outsourced Chief Financial Officer. He developed the Strategic Financial Management System™ to help business owners and their employees thrive by being in the top 10% of their industry.
Take the 12-minute Value Builder Score to get immediate feedback about where your business stands.