By mid-century, Baby Boomers will either sell or pass on an estimated $72.6 trillion in wealth. Due to its immense size, this impending phenomenon is known as the Great Wealth Transfer. If the money were divided evenly among the populations of Gen X and Millennials, each person would receive $220,000. Home ownership and small businesses are the 2 greatest wealth sources of Baby Boomers. Over the next few years, that wealth will fall into new hands.
Looking specifically at small businesses, Baby Boomers own 40% of the small businesses and franchises in America. 35% of their businesses have been in operation for over 10 years, and 75% are currently profitable. The top industries for Boomer-owned businesses are business services, retail, and construction. These industries are relatively mature and stable over time.
Millions of American workers rely on income from Boomer-owned businesses. 25 million people are in their direct employ while millions more serve as vendors, suppliers and freelancers. Boomer-owned businesses are a crucial part of the US economy, yet for many, their future is uncertain.
10,000 Baby Boomers retire every day. The youngest Baby Boomer, born in 1964, turns 58 this year. Despite that, more than half of small business owners lack a transition plan. Many say they don’t have one because they still enjoy running their company. Unfortunately, not everyone gets to retire when they want to. Plenty of Baby Boomers retire out of medical necessity. If it’s not their own health, then it’s their partner’s. Due to rapid increases in healthcare costs, many retiring Boomers may sell their businesses to afford a comfortable retirement.
Selling a small business can be hard. Some business owners spent their lives growing their company. They started with an idea and turned it into a profitable reality. Now the owner has to embark on a new chapter of their life, leaving their business behind. Even putting aside the emotional difficulty of the transition, finding the right buyer is an enormous challenge. Many businesses are too small to show on the radar for private equity funds. Worldwide, mergers and acquisitions are down. Without an established business owner to sell to, some Boomers may have to look elsewhere. They might turn to a Millennial looking to own a business for the first time.
Millennials are increasingly looking to become their own bosses. Buying an established business can be a better option than starting a new one. Boomer-owned businesses already have local brands and loyal customers. They provide services with proven demand and have made it through at least one recession. While many children of Boomer business owners are also Millennials, they’re less likely to take over a family business. Other enterprising Millennials have a chance at first-time business ownership.
How can someone convince a retiring business owner to sell to them? Like any business owner, Boomers want someone who will take care of their business. They want the new owner to have the right skills and experiences and to keep existing employees.
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