Over the next 10 years, the landscape of business ownership in this country (and across the globe) will begin to change dramatically. The unstoppable change has already begun as millions of baby boomer business owners begin to contend with retirement and the importance of exit planning.
By definition ‘baby boomers’ are people born during the demographic post–World War 2 baby boom approximately between the years 1946 and 1964. This includes people who are between 52 and 74 years old in 2018.
As recently as 2016, roughly 2/3 of all businesses were owned by baby boomers. Unfortunately, many baby boomer business owners don’t begin to think through their exit strategy until they are on the brink of retirement age, which puts them at a significant disadvantage.
One factor that complicates the exit strategies of baby boomer business owners is the question of who will take on leadership of their company once they retire. In past generations, business owners would usually pass their business on to their children, but because baby boomers had fewer children than their parents, many baby boomer business owners are forced to face challenges regarding succession and liquidity.
If you’re a baby boomer business owner who has not yet begun the exit planning process and wonders when is the right time to get started, the answer is now. Depending on how close you are to retirement, here are some questions you need to answer and some ideas to help you begin your exit planning.
Remember one way or another you will exit your business!
You need to plan now. Exit planning requires careful consideration of important questions. These are the types of questions you should begin to think through:
- What happens if you are not able to run the business?
- Who will run the company?
- How will you be able to provide for your family’s financial needs?
- How will you prepare your successor to run the company once you are gone?
If you plan on leaving your business to your children, then you must determine what you will need in retirement. Think about how to structure the transaction to balance the needs of your children with your needs. Begin to plan the transition of management.
The process of determining your exit strategy is not just limited to the baby boomer generation as the fact that some day you will no longer be able to work within your business will come to us all. If you need to discuss your options, or even just your starting point,
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