When Great Outdoor Provision Co. founder Tom Valone announced in January that four members of his management team would acquire his business -- the largest independent specialty outdoor retailer in the Southeast --he accomplished something many business owners never do.
He created and followed an exit strategy.
As baby boomers near retirement, those who own private businesses will face a decision similar to that of Valone, of Raleigh, N.C. But his foresight and planning isn’t the norm, said Rob Alexander, Valone’s accountant, and a partner with Raleigh accounting firm A.T. Allen & Co.
“The guy that doesn’t have a plan is a whole lot more common than the guy who does,” said Alexander.
Christopher Snider, president of Exit Planning Institute, an organization that provides education to advisers who work with owners leaving their businesses, said most people don’t give themselves sufficient time to properly plan.
As a result, owners sometimes regret the decision to sell, or realize that they could have made more money on the sale. Also, many owners aren’t financially prepared for the loss of business income and end up going back to work, Snider said.
About 60 percent of privately owned businesses are owned by baby boomers, based on the most recent U.S. Census Survey of Business Owners. About 10,000 baby boomers are retiring every day, according to Pew Research Center population projections.
“It is just inevitable that over the next 20 years, 60 percent of the businesses are likely to transition in some way,” Snider said. “In that kind of a situation, only the businesses that are in good shape, that have taken time to minimize risk and have taken the time to make themselves attractive are the ones that are going to sell.”
The majority will end up liquidating, the least favorable option, or selling at a significant discount, Snider said.