Workers of the baby boom generation continue to retire in great numbers. Many of their fellow Boomers who are business owners are also planning retirement. That is creating a new set of challenges for them, and for the economy.
According to information from the U.S Census Bureau, Boomers own over 2 million small businesses, employing approximately 25 million people. Yet numerous polls show that a majority of these businesses have no clear transition or succession plan when the owner retires. A survey conducted by the Wilmington Trust in late 2019 found that nearly 60% of small business owners do not have a succession plan in place.
A major sticking point for these business owners is whether to sell their business or pass it along to a successor. For many of the owners of these small and closely held companies, much of their overall net worth is tied to the business. Further complicating matters is that millennials and their younger counterparts are often not interested in taking over the family business.
Without a clear transition or succession plan, these business owners risk not only impacting their own retirement, but they are also putting at risk the jobs and futures of those they employ. Why are so many of these owners continuing to live in denial or not actively working on a plan of succession?
Some believe that their company may not bring what they feel it is worth. For others, it is a sentimental and emotional attachment, with their senses of self-esteem and worth tied to the businesses they have built from the ground up.
Whatever their reasons, these aging business owners should begin work on a transition plan now. Starting sooner rather than later to organize a successful succession strategy allows for time to consult with experts such as attorneys and business consultants. This ensures owners can control and be part of the process. Because one way or another, a transition will occur.
Author- David Braun is the CEO and Founder of Capstone.