Baby Boomers, that energetic group of people born between 1946 and 1964, are embarking on a great transfer of wealth to inheriting generations. That includes multiple trillions of dollars in boomer-owned business assets that could be passed down or sold by 2025, just nine years away. But, the 2015 US Family Business Survey by PriceWaterhouseCoopers found that only about 27% of private businesses have done any exit planning, whether to sell out or pass their interests on to a new family generation. As a tax planner, I work with many of these soon-to-retire Boomers, and I know that too many businesspeople don’t want to face the idea of retirement. Their business is their life, and the idea of giving it off to someone else is almost unthinkable!

More to the point, many of these folks have all they own tied up in the business and have no idea how to “exit on top” with a great selling price or even know what to do with the proceeds to fund a great retirement.

The California Business Brokers Association (CABB) blog shared some critical facts about the trillions of dollars in business value Baby Boomers will be transferring or selling off over the next decade or so.

• Retiring Boomers will sell or bequeath $10 trillion worth of assets over the next two decades.
• Many of these assets are held in over 12 million privately owned businesses.
• Over 70% of these businesses are expected to change hands.
• Selling, transferring (or closing) over 12 million businesses over the next 10 to 15 years is a significant increase in the annual number of businesses to be sold.

Interestingly, some of those sales will be between Boomers, as this generation redefines retirement by staying highly active:

• The CABB predicts these sales might involve a large number of boomer-to-boomer sales. This could be older Boomers selling to younger Boomers, or those ready to retire selling to those who will “work until they drop.” (I have clients on both sides of that mindset!)
• Baby Boomers ages 52 to 64 still form businesses at a higher rate than other age groups.
• 55 to 64-year-olds form businesses at the highest rate of any age group, partially driven by the need to keep earning income for the next ten to fifteen years.

Many of the Baby Boomers are too young-at-heart to retire; they have job-related skills and wisdom accumulated through a lifetime of work and want to keep contributing. I know because I’m one of them.  Unfortunately, many Boomers have found themselves “on the street” as a result of the Great Recession, without the employment and retirement safety nets their parents had. The CABB writes that this give Boomers an “intense desire and need to have control of their destinies.”

Ironically, running their own small business now seems more secure than finishing their careers. Consequently, a solid exit plan will be critical in enabling these business owners to achieve the best value possible during this Boomer-induced wave of business sales.

To Exit on Top, Build a Solid Advisory Team

If you are a small business owner, you must begin the “exit strategy process” a few years before you pull the trigger and retire from that business. You should surround yourself right now with seasoned professionals who will collaborate together, work in your best interests and guide you through the process.  These include:

• A Financial Advisor
• Your CPA
• A qualified proactive Tax Planner
• An attorney specializing in estate planning
• Your Insurance agent
• A business valuation consultant

In all the 46 years I have been in business, one thing has always proven true: I must surround myself with professionals far brighter than me and work collaboratively with them.  As the old proverb says, “There is wisdom in many counselors.”  Gather a team of professionals around you whom you trust, and, if possible, start at least two years before you want to exit your business. If you don’t have the two years, then start now.

Whether you are thinking about transferring your business interest to family members, liquidating assets, or selling your share of a business to partners or a third party, we should discuss the tax planning steps you need to take to maximize your selling price, minimize your taxes, and move to the next phase of your life in great financial shape.

If you have any questions or would like to discuss how to “exit on top,” give me a call.  You have no cost or obligation.  But you do have a great deal to gain!