Baby boomer retirements – What this means for business owners
External market factors play a huge role in determining the value of a company. Regardless of how well your company may be performing, the disappointing thing for business owners is that a variety of factors that impact the value of a business are beyond the control of the owner.
Over the coming years the number of businesses on the market is set to increase substantially as baby boomer business owners reach retirement age. This flooding of the market will undoubtedly have a profound effect upon business valuations, as supply will likely outstrip demand, leaving acquirers in a much stronger position.
Taking a look at the following facts relating to baby boomer business owners it is clear that the market is set to change significantly.
- 2012 saw 0.73m people reach 65, an increase of 0.17m from the previous year.
- On average over 0.7m individuals per year are set to reach retirement age until at least 2018.
- 3.3m people poised to reach retirement age in the next 5 years.
- From 2011 onwards 10,000 people a day have been turning 65. A trend that will continue for the next 19 years.
- Up to ¾ of SME’s in the USA are set to come up for sale over the next 10 years.
With this in mind, what then should business owners do in order to avoid the negative effects of the impending market changes? At Benchmark International we always suggest that business owners to plan their exit early as businesses groomed for sale inevitably attract the highest value multiples. However, with the market conditions set to change significantly the importance of setting the wheels in motion is greatly enhanced.
If you are a business owner considering an exit in the next 5 years it would be wise to start considering and planning your exit as soon as possible. In this instance, procrastination could cost huge sums in terms of value received upon your eventual exit.