Danielle Kane | Better Business Bureau Northwest + Pacific
Main Street, America, is kept alive by Baby Boomers across the country, but those Boomers are retiring in record numbers leaving main street in peril.
Boomers own 2.34 million small businesses in the U.S., employing 25 million families – that’s roughly 100 million citizens. These people depend on their small business employer to make the right decisions as they navigate through challenging economic times and plan for their own retirement.
However, many Boomers are struggling to decide whether they should sell their business or pass it along to a successor. So, what are they doing to make that hard decision? Unfortunately, just biding their time.
A staggering 58% of small business owners have failed to complete a succession plan; many have not even contemplated a transition plan at any time in their decades of owning the business, according to a survey by Wilmington Trust.
Better Business Bureau Northwest + Pacific believes this is extremely problematic. For one, it’s a problem for the boomers who have done little to no homework on what they will need to retire or what steps to take to get there, meaning they could be well underfunded when retirement comes. The marketplace implications, however, are much larger. Those 25 million families employed by small business owners will be directly impacted, but the indirect impact will ripple to the tens of million of vendors, partners, independent contractors and other workers that rely on these Boomer-owned small businesses.
In short, the consequences of failed succession planning loom large.
But, while Boomers need to stop kicking the can down the road, the demise of Main Street is not entirely their fault. Millennials and other younger generations are not interested in running the family business. They are not willing to bear the burden they’ve watched their parents endure to run a small business well into their 70s.
So, while succession planning must be done, the question becomes, who will take over the business?
Experts pose two options. The first, and somewhat easier option, is to narrow it down to a couple of employees you, as the business owner, can trust to carry on your legacy. Once the person is picked, it’s time to groom them to take over and make your exit.
The second is, of course, to sell, likely to a private equity buyer. This takes significant preparation, including bringing on an advisory team to help navigate the deal from preparation, through execution to closing. This team helps to appraise the value of your business assets, protect your interests and mitigate your potential liabilities.
If an outsider buyout is not an option, consider Plan B: selling the business to a select number of current employees (known as a managerial buyout) or even all of the employees (known as an employee share ownership plan).
No matter the road Boomers choose, it can no longer be put off.
Experts agree small business owners tend to get stuck in the decision making for many different reasons. Some financial – Boomers are fearful that a sale will not make enough proceeds for their retirement plan and/or they don’t have enough saved for retirement to step away. For others, it’s simply emotional – Boomers’ sense of self-worth is tied to the operations of the business they built.
While there are many uncertainties, BBB NW+P agrees that one thing is certain: Main Street, America, will suffer the most as more Boomers retire with no succession plan in place. The lively, familiar streets we can all picture in our heads as we reflect on our hometowns will look vastly different in the future if action is not taken now.