Rising Above the Crowd: On Baby Boomers Selling Their Small Business
Stuart: Here’s a story around today, 24 to midday.
If you’re in around your 50s and 60s trying to sell your small business, they basically advise to join the ever lengthening queue. Many baby boomers are struggling to sell their small business. Kerry Boulton is the CEO of The Exit Strategy Group and is on the line. Kerry, good morning.
Kerry: Good morning Stuart.
Stuart: Thank you for your time.
Are you seeing an example of this where more and more people in their 50s and 60s are trying to sell up?
Kerry: Absolutely! In fact it’s the growing trend. Of course we are all baby boomers and looking down the barrel of retirement and how we are going to be able to fund that. The pension isn’t going to do it for us. We are not used to being able to live on something as low as that. So selling the business is probably the next step that a lot of baby boomers are looking for.
Stuart: So I suppose with that you consider the record 41,000 businesses for sale across Australia in October 2014. With that sort of supply it does mean that the prices are going to be affected.
Kerry: They certainly will be. The advice that I’d be giving to baby boomer business owners in particular, in fact any business owner is if you really want to sell your business you have to really spend some time, look at it closely, think about what’s going to make it attractive to any potential buyer so you can stand and rise above the crowd head and shoulders. There will be a lot of pressure.
Stuart: Are there some particular businesses that’re increasingly proving more difficult for people to sell?
Kerry: Look I think some of the smaller retailer businesses are.
Stuart: Right. Little restaurants, cafes, those sorts of things.
Kerry: Yes they certainly are. Generally speaking any business that has a decent customer base that you can think like your customers and just stay in tune with what the market is about is actually going to be very attractive.
The generations coming through, for them there’s an enormous opportunity to be able to get in, understand what the business is all about and work with the current owners so they can have a smooth transistion in the form of a management buyer makes a lot of sense.
Stuart: Right. I’m assuming with all of those businesses for sale, some of the next generation that are coming through, there aren’t necessarily a number of them enough wanting to run their own business to be able to soak up all of that supply that is out there for business.
Kerry: No there certainly won’t be enough coming through but there will be some who can take advantage of an enormous opportunity. With the right pool of thinking from the current owners as well, instead of just thinking, “What am I going to do? I’m going to put my business out there in the market, just sell it,” think strategically about who could buy your business. It may be a case of you might go out as well and acquire a couple of other businesses to actually grow your own business and make it more attractive.
Stuart: Of course it can always be more advantageous to buy an existing business where you can look at some of the financials and get a feel for how it’s operated.
Kerry: It is so much easier to buy an existing business with existing cash flow.
Stuart: And customers importantly.
Kerry: Correct. Absolutely. In fact, that was something I did myself more than 20 years ago now and I’ve also started a new business. It’s chalk and cheese, night and day. It is so much easier going in to buy an existing business and particularly working with the people that are there, the customers that are there and looking at the opportunities for the future. That’s where some real action lies.
Stuart: Right. And you’re talking about this management buyer you’re saying a moment ago, that’s an opportunity to free up some capital within the business but you stay on in some sort of consultative role and you might be able to transition to retirement that way.
Kerry: Correct. It’s really a viable opportunity for a lot of people in business. As I said earlier, just saying, “Bingo, I want to sell my business,” is not always the best option for you. There are so many different options that you actually have. Just taking some time to get your business set up properly to be attractive to the marketplace is really what it takes.
Stuart: Look at side trail, a mate of mine is now in his early 70s, he had a business on the south coast. He got rid of it because the demands, it was hospitality business, was such it was just too much. He got out of it for a while and then figured he was bored doing nothing. Now he’s back with another one, unfortunately it was not doing as well as the previous one was. He was thinking if only there was a way that he could have remained involved in some way in the business that he had previously that would have reduced the downtime but would have also reduced his work load. It would have been a much happier medium for him.
Kerry: Absolutely. It just requires a bit of thought, a bit of strategic thinking, getting some help from some people that haven’t wanted to go out and do before. Getting someone else into your business who is a bit younger maybe, a little more savvy in terms of understanding the changing market place. How you can actually market out there, social media is such a big thing these days, perhaps some people aren’t quite familiar, who are in a slightly older age bracket particularly baby boomers. That’s just a terrific way to be able to continue to be involved. That whole transitioning process is crucial because I’ve seen it myself, in fact I did it myself.
Retired for a little while and said no this isn’t for me, I’ve got to get back out there and just do something in the market place that’s going to help us baby boomers move on. Transitioning is just so important.
Stuart: Well it is very important. Great chatting with you Kerry. I appreciate your time.
Kerry: Thank you very much Stuart.
Stuart: Thank you. Kerry Boulton, the CEO of The Exit Strategy Group. You may have done something similar if you had other family members who perhaps were prepared to take up the reigns and run the business for you. You’re able to sort of gently transition yourself out. You might have been equally in the scenario where you did sell up, lock, stock and barrel and then figured what you’re going to do now that you’re retired.
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