The baby boomers have made quite a splash on society throughout their lives. As babies, they impacted diaper and baby food sales. In early childhood they wanted Hula Hoops, Tinker Toys and Superballs. When teenage years hit, they put McDonalds and Kentucky Fried Chicken on the map. The sheer number of boomers led to massive increases in roads, housing, schools (including colleges and universities) and social programs. And since there weren’t jobs for all of them once they hit working age, millions of them started their own companies.
Now they are close to retirement. Economist and demographic expert Robert Avery of Cornell University predicts baby boomers will transfer $10 trillion to later generations, and the vast majority of this wealth is held as stock in privately-owned businesses. During the next 10-15 years, he estimates that more than 70 percent of these companies will change hands.
Are they ready to sell? The 2013 State of Owners Readiness Survey sponsored by the Exit Planning Institute (of which I’m a member) found that 83% of owners surveyed have no written transition plan. Two-thirds are not familiar with all of their exit options. While 56% felt they had a good idea of the business value, only 18% had done a formal valuation. Sadly, 49% of the owners of these privately-held businesses had done no transition planning at all.
That probably explains why 70% of Merger and Acquisition (M&A) professionals said business owners are minimally or not prepared to sell or transfer, according to a study conducted by the Alliance of Mergers and Acquisitions Advisors. As a result, many businesses do not sell as a going concern. Rather, the assets are sold and the business ceases to exist.
So if you are a boomer, you are close to retiring and you’ve done no exit planning preparation, now might NOT be the best time to sell. However, it’s a GOOD time to get your transition plan started. Because of the large number of businesses that will be on the market in the coming years, buyers will have ample choice in which businesses look attractive to them. What makes a business attractive to a buyer? Key on that list would be a stable management team (there’s little value in a business that can’t operate if the key person retires), audited financials (doing the books yourself may save you some money, but a potential buyer wants verification from a reputable outsider), written policies and procedures that help ensure consistency and reliability within the business, a diversified customer base, an attractive facility, profits with a strong and growing cash flow, and a good long-term growth strategy.
So a little planning on the front end could mean substantially more value at transition time. Since no single professional can be an expert in all areas, a team approach usually works best. That team often includes an attorney, a CPA, a Financial Advisor and/or Estate Planner, possibly an Investment Banker, and an insurance professional. A specially-trained exit planner with a designation such as a CEPA (Certified Exit Planning Advisor) may also have one of the above-mentioned credentials and would be a good individual to start the process, coordinate the other team members and start the initial fact-finding process. Often, the goal is to start early enough before transition (3-5 years) so that the business has time to improve on those items that add the most to a company’s value for when the owner is ready to ride off into the sunset.
Michael Moffitt may be reached at phone:(641)-782-5577 or e-mail: mikem@cfgiowa.com website: cfgiowa.com
Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

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