Baby Boomer Owners - Transition Planning
By Ross Miller, Director,
Illinois Small Business Development Center
Every business owner must eventually leave the business. This will happen by choice or by circumstance. If a business owner plans for that exit, he or she may receive money for all their hard work.
The numbers are staggering – 66% of small business owners are Baby Boomers (Pew Research Center). One-third plan to sell their business, want a family member to take control, or plan to sell off the assets and close the business down. The International Business Brokers Association (IBBA) reports that 80% of those small businesses are not ready for the transition.
When should a small business consider transition? At a minimum, the transition should be considered three years prior to the planned exit date. That will allow for changes to be made to the business so that the financials will look better for the bankers that may be needed to finance the transition. All too often, business owners will “retire” from the business many years prior to actually leaving the business. Progress and expansion will stop, and the owner will try to maintain the business. When the business stops progressing, the competition will usually start advancing. If changes aren’t made, the business will not be worth enough for the owner to retire.
What type of transition should be considered? Most small business owners know of a couple ways to transition out of the business. Many are surprised that there are as many as nine viable ways to exit the business. From gifting the business to a family member, to selling to a competitor, to selling off the assets and closing the doors, all options should be explored.
I recently earned the Accredited Business Planning Advisor (ABPA) credential from The Apogee Center. This allows me to offer small businesses owners advice and resources on exit strategies. The process involves providing the owner with multiple options for exiting the business and an explanation of the cash the seller would receive from the transaction. It also helps the owner learn what needs to be done to the business to make it reach the value he or she would require to fund retirement.
If you are interested in learning more about this process, call Ross Miller at (309) 677-2992 or email at firstname.lastname@example.org.