Session Title

Presented by: (First and Last name of presenter(s)

H O S T E D B Y :

Exit/Succession Planning for Baby Boomer Business Owners

Beating the Boomer BustPart I

The Entrepreneurial Generation

Why do Baby Boomers Own So Many Small Businesses?

Analyzing the Boomer Bust“I don’t predict the future, I just look at what has already happened and determine the inevitable consequences.”

Peter Drucker

The Baby Boom started 60 years ago. It’s effects are still reverberating

Boomers Own Businesseso USA population: 318 milliono Baby Boomers: 78 million (25%)o 2-500 employee businesses: 9 milliono Boomer owned: 5.5 million (61%)

Why are Boomers 2 ½ times more likely to own a

business?

Start With the Numbers

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Births in Millions

1945: GIs returning from WWII start

the Boom

1965: 40% of

Americans are under 21

Add New Technology

o Television becomes the center of the homeo Marketers’ messaging reaches millions

Walt Disney’s Geniuso Bypass parents and market directly to Boomerso 1955: Disneyland opens/Mickey Mouse Clubo 1959: 25,000 pair of Mouseketeer ears sold daily

With…• No Internet• No 800 numbers• No credit cards

Everyone Shares the Same Experiences

Regional and ethnic differences blur.

Boomer moments are America’s moments.

Watch the Economy Grow

Suburbia booms A car in every garage

A rising tide lifts all boatsNew schools, highways, stores, houses

More consumers, more jobs, more wealth

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College Graduations

1965: Boomers

start turning 21

o US workforce goes from 6% to 25% college educatedo 1970’s employment grows 53% faster o Colleges and corporations are overwhelmed

Boomers Go to School

Boomer Driverso Scarcity

o Not enough classroomso Not enough collegeso Not enough jobs

o Formula for Successo Work hardero Prioritize career

Everything is a competition!

Boomers Needed Businesseso They were raised to expect it all

o Educatedo Consumeristic

o Success is defined by:o Careero Lifestyleo Possessions

Boomers are what they do, and are what they own!

Boomers go into Business

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Business Start-Ups1975: First Boomers turn 30

By 1986 business formations are 250% of

10 years earlier

Franchisingo “Business Format” franchising

The promise: “If you are willing to work very hard, you can have an executive income without climbing the corporate ladder.”

Chasing Successo Women join the workforce

o From 1950 to 2000, a 300% increaseo Less time at homeo 1984: “Work/Life Balance” is coined

Boomers Fuel Franchising

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New Franchises in America BoomersTurn 30

In five years, new franchise unit sales grow from 3,000 to over 20,000 annually

Outsourcing The Home

o Find other self-employed Boomers to:o Babysit (day care)o Do homework (after school care)o Coach (organized sports)o Cook (take out, drive through)o Home care (lawns, repairs, cleaning)

Boomer Serving Boomers

o Boomers free time for producing income by contracting to other hard-working Boomers, who

o Free time by shifting their chores to other hard-working Boomers, who…

o Hire other Boomers.

What Happens Next?

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US Labor Force Growth

2010- First Boomers turn 65

1985- Last Boomers turn 20

A 50 year surge is coming to an end

Exiting A Small Businesso Millions of Boomers are retiringo Most are planning on equity

from their businesso What if it isn’t there?

(In the fourth quarter of 2012 )“For the first time, baby boomer retirement was the number one reason driving business sales.”

Pepperdine University/IBBA/M&A Source : Market Pulse Survey 2013

The Exodus

o 5 million Boomers are exiting

o Buyers have more choices that do not require:o Long hours

o Investment

o Risk

Forget the fiscal cliff, the sequestration cliff and the entitlement cliff. Those are just symptoms. What America really faces is a demographic cliff.”

– The Wall Street Journal, February 2, 2013

Part IIThe Tsunami

As the Boomers Exit, Where Is the Next Generation of Small Business Owners?

The “Baby Bust”

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Births in Millions

1965: Boomers turn 20, but delay

having families

1990: Birth rates again

reach 4 million

“What Americans have to understand is that this country reached its demographic peak ten years ago.” David T. Beers, Standard & Poors Head of Sovereign Credit ratings on the downgrading of the

U.S. credit rating to AA+, August 7, 2011

The Seller’s Tsunami

o Demographic: o Fewer peopleo Slower growtho Oversupply

o Psychographic: Generation X is less inclined to entrepreneurship

o Sociographic: Big business can outbid small business for workers

Demographic

From 2018 to 2023 Retiring Boomers will outnumber GenXers reaching ownership age by 4,000 A DAY!

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Boomers turn 65

Xers Turn 45

Births in Millions

Psychographic (Attitudes)

o My life outside of work defines meo Business is secondaryo Don’t mix job and family

o Too much work is bado Time for my “real” lifeo Money isn’t that important

(and I’ll probably inherit a bunch from my boomer parents anyway…)

Sociographico Corporate America is replacing the Boomers

o Jobs are being tailored for scarce workers

o Entrepreneurs can’t match:o Limited hours

o Benefits

o Telecommuting

o Flex time

o Personal leave

Different Expectationso Boomer Entrepreneurs

o Work is successo What I do is who I amo Delayed gratification

o GenX Workerso Average 7 career shiftso I am not my jobo The future is uncertain

Beating the Boomer Bust

• The Seller’s World– Flood of businesses

coming to market– Most are not suited to

GenX buyers

• The Buyer’s World– More alternatives– Little or no savings– Low tolerance for risk

Cold, Hard Facts

o 5,500,000 Boomer Businesses o Brokers sell 1 out of 5 listings

o The other 80% will…o Create their own exit plan, or

o Close

Building Your Exit Plano Internal

o Employee(s)o Family

o Externalo Third party saleo Tailored to a GenX buyero The sooner you start, the

better

It’s THE most important financial event of an owner’s lifetime!

Triangulation

Part IIIFive Roads to Exit

Sooner or later, every owner exits his or her business.

Exit Realitieso Boomers will exit over 5 million businesseso Not all will succeed in sellingo Preparation = Choices

Option 1

Ignore It

You can plan for the most important financial event of

your life, or you can choose to have it be a surprise

Option 2Wait and Watch

o Knowledge is powero Be prepared to sell

o Track key indicatorso Financial markets

o Industry Trends

o Listen to any offers

Option 3 Planned Liquidation

o Your company can’t run without you

o You don’t have a saleable modelo Too many hours

o Too much risk

o You don’t need the equity value

Option 4Prepare for a Competitive Sale

A saleable companyü Is in the top quartile of its industry

ü Has documented systems and processes

ü Shows strong revenue and profit trends

ü Includes post-sale management

Option 5Develop Your Successor

o Train and finance while you maintain control

o Valuation based on need, not negotiations

o Choose your exit date in advance

Exit Planning Timelines

o Close Down: 1 yearo Sale to a third party: 2-3 yearso Employee successor: 3-5 yearso Child in the company: 3-5 years

The Boomer Fantasy: “I’ll find a younger person who is just like me!”

You Can’t Change Historyo Historical birthrates are fixed in stoneo Every owner will exit his or her business

Boomer owners need exits from 750 small businesses a

day

Planning – Coaching – Assessment – Development – ImplementationFor Business Owners in Transition

www.exitmap.com

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