Business Exit Timing 243-2439

Boomer Generation Business Owners

“Planning is never too late until it’s too late”

Mike Roy

In a recent survey of business owners, 96% agreed that having an exit strategy was important for their future, as well as the continuation of the business beyond their leadership. Also noted were the three most important exit planning objectives:

1. Achieving financial security
2. Maintaining family harmony
3. Obtaining maximum value for the business

Though nearly all those surveyed agreed that having an exit strategy was important, fewer than 23% of the respondents claimed to have a written Business Exit Plan. In fact, many responded that maintaining a focus on the growth of their business was a major reason why they have not spent time on exit planning.

“At any given time, 40 percent of U.S. businesses are facing the transfer of ownership issue.”

Timing is Critical

The Baby Boomer generation contains 78 million members. It is the largest, most influential generation in the history of our country. Beginning in 2006, Boomers (people born between 1946 and 1964), began turning age 60. This trend will continue at a rate of 8,000 per day for the next 14 years, until 2024.

Robert Avery, economist and demographic expert at Cornell University, predicts Baby Boomers will transfer $10 trillion in wealth to later generations. This will be the most significant generational transfer of wealth in the history of our country.

Moreover, according to Avery, “the majority of Boomer wealth is held in 12 million privately-owned businesses. This phenomenon has created a literal tsunami of Boomer business owners intent on exiting their businesses within the next 15 years.

What is a Business Exit Plan?

A comprehensive Business Exit Plan is a road map designed to help you successfully exit your business on your terms and your schedule—not someone else’s. An effective Business Exit Plan addresses all of the business, personal, tax and financial questions applicable to selling your business to an outside third party or transitioning your business inside to the next generation, a co-owner or key employee(s). It includes contingency planning for the unexpected such as a prolonged illness, disability, divorce or the premature death of a co-owner, key employee or you. An exit plan’s ultimate purpose is to maximize business value at your departure, minimize tax liabilities, plan for contingencies and ensure the likelihood of a successful exit so that you achieve your personal and financial goals.

Why You Should Plan Your Exit:

  • Most Boomer-owned businesses will change ownership during the next 15 years.
  • 65% to 85% of a business owner’s net worth is locked up in their business.
  • 54% plan to use their business as a major source of retirement, and the majority are not prepared for their inevitable departure.
  • The first wave of the Boomer tsunami began in 2006 and will continue through 2024, flooding the markets with businesses for sale—the ultimate outcome will be reduced business values.
  • Contingency planning—most family-owned businesses do not survive the death of the owner.
  • Only 30% of family-owned businesses survive transfer to the second generation, 12% to the third generation, and only about 3% make it to the fourth generation—failing to plan is the primary reason for these failures.

“Within the next 15 years, there are going to be more businesses for sale than there are buyers to buy them.”

If your exit strategy is to sell outside to a third party, then you need to catch the wave early, before there is a glut of businesses on the market for sale. If your departure plans are in the future, you need to begin preparing your business now for your eventual sale. Be prepared to attract qualified buyers—buyers with money. These buyers are usually strategic or financial-type buyers. They typically pay higher multiples for your business. They also come to the table prepared with their own set of professional advisors. If you are not properly prepared, your business will be passed up. A comprehensive Business Exit Plan will prepare your business for strategic and financial buyers. It will also place a premium on the value of your business.

A Successful Exit Requires Well Thought Out Answers to These Questions

1. Do you know when you want to exit your business?


2. Do you know exactly how much money, after-taxes, you will need to sustain your desired lifestyle though-out you and your spouse's joint life-expectancy—25-35 years?


3. Do you know how much your business is worth today?
4. Is your business properly positioned to attract qualified buyers— strategic and financial buyers with money?
5. Do you know how to properly transfer your business to family members, a co-owner or key employee(s) while receiving maximum value and paying the least amount of taxes?
6. Do you have a legitimate contingency plan in place that ensures the continuity of your business if the unexpected should a key employee, co-owner or you?
7. Do you have a plan that will assure your family's financial security if
you die pre-maturely or become totally disabled?

If you answered 'No' to any of these questions, BETiming can help.
Call us to schedule a free 20-minute phone consultation and informational webcast.

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