A growing wave of local business owners are reaching retirement age, and not all of them have a plan for what comes next for their company.
Right now in the region there are more small business buyers than quality businesses for sale but the balance is shifting as baby boomers age, Gerry Chadwick, owner of Sunbelt Business Advisors, a business brokerage.
Chadwick said his brokerage sees too many business owners who don’t look look up to make a retirement plan in advance until they are already at the point when they’d like to sell and move on.
“Unfortunately when they hit that wall, they leave a lot of the value of the business on the table,” he said.
As more members of the 74 million members of the baby boomer generation continue to reach retirement age, the generation has been boosting the number of U.S. businesses for sale.
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Nationally, the number of small businesses listed for sale has steadily increased over the last few quarters and in 2017 the total listings increased 3.8 percent from last year, according to BizBuySell, an online business-for-sale marketplace that tracks small business sale data.
There are other reasons, like the improving economy, that have led to more businesses for sale, but ta big factor for the increase is the large number of business owners in their 60s and up looking to retire.
“Baby Boomers looking to capitalize on today’s favorable conditions and exit small business ownership for retirement are fueling the market supply,” BizBuySell said. “At the same time, younger buyers are finding attractive, healthier businesses for sale with greater access to lending, again pointing to a well-balanced market.”
One of Sunbelt’s clients, Mike Wood, sold his Moraine machine shop Cat-Wood Metalworks last year after 23 years in business because he was starting to worry about what would happen to the company if something happened to him.
His long-time business partner died in 2011 and Wood said he’s had cancer twice since 2012. He wanted to cut back from the 60 to 70 hour weeks he was working and spend more time with his wife and kids.
“It was like getting out while the getting was good,” Wood said.
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Chadwick said he also runs into business owners who maybe lost money during the recession or aren’t financially where they need to be, so they keep operating their business with no plan in sight for retirement. He’s worked with several widows recently who were suddenly left with making decisions on what to do with their late spouses’ businesses.
“To say ‘I guess I’ll have to work for the rest of my life now’, well that’s not a plan,’” Chadwick. “It’s not uncommon. It’s also unrealistic, and that’s the problem.”
Small business owners also have to weigh issues like whether they’d sell to a larger out-of-region firm that might pay the best price but could consolidate or move the business, or verses selling to another local business owner who might have less financing but would keep the business in the community.
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Chadwick said when the offers are close, the local buyer almost always wins over the larger firm. Sellers want to protect their employees and protest the reputation of the business they’ve built over decades of work.
“Almost always we see individual buyers winning deals against private equity firms. Why? because people right, wrong or indifferent think of private equity firms as being just numbers,” Chadwick said.
Wood said he had other interested buyers but sold his business to A.J. Rolling, a local resident who works at Wright-Patterson Air Force Base, and to his brother, Dave Wood, because it was important to him to know he was selling to a new owner that wouldn’t move Cat-Wood out of the community.
“I had trained a lot of the buys that are still there today,” he said. “I didn’t want to sell it to somebody that was going to move it.”
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