In 2012, the first wave of more that 66 million baby boomers become 65 years old and will begin to draw Social Security. By the end of 2012 10,000 people a day will be turning 65 years old. Many of these baby boomers own their own Company. What will happen to these businesses as the owners continue to age?
Recently, Jerry Mills, the founder of B2B CFO®, was interviewed by Morningstar on this upcoming Small Business Tsunami See video here
Jerry noted that of the 12.5 million American businesses owned by baby-boomers it is estimated that 8.4 million of them will undergo some kind of significant ownership change. Other estimates say that most small business owners have 80 to 90% of their personal wealth tied up in their business. Those are staggering numbers.
So what is a business owner to do? The answer is to make a resolution. Resolve that you will position the business for sale long before you want or need to sell it. In his book, The Danger Zone, Jerry suggests you think like a buyer. Here’s how you do that:
- ·Make sure you have a robust financial infrastructure in place. You should be able to produce accurate and timely financial statements that not only stand up to the scrutiny of third party audits or reviews but also serve as the credible basis of future projections.
- Make sure you are current in all tax jurisdictions where your business operates.
- ·Be sure the procedures to build the goods or deliver the services are well documented.
- ·Bring your information technology up to current industry standards and be absolutely sure that you have proper backup and recovery procedures and no illegal software.
- ·Ensure that customer relationships are not dependent on the owner remaining with the company.
- ·Assemble a top-notch management team in key positions within the company.
- ·Make sure that all warranty and contingent liabilities are identified and quantified.
- ·Take all steps necessary to protect and document the company’s intellectual property.
When the day comes that you are negotiating with a potential buyer there are two additional things to remember. First, do your due diligence on that buyer to make sure they have the financial capacity to follow through on giving you the full value of your business. Second, do not become emotionally tied to your business or to your potential buyers. Step back and be objective. Listen to your advisors. That’s why you hired them!
A tsunami watch has been posted for American small business. Take precautions now to prevent financial injury when the wave comes crashing.
A B2B CFO® can help you survive the sale of your business. Putting all of the above processes in place is a 12 – 24 month process. The process needs to start well in advance of the date that you would like to sell your business.