The Business Transition Crisis

Millions of businesses across North America are owned by soon to be retirees that don’t have a transition plan. As Baby Boomers retire in record numbers the issue remains as to what will happen to their businesses, to their employees, and the economy at large.

The silver tsunami

According to the PEW Research Center in an April 2020 article, Baby Boomers totalled 71.6 million in the U.S. as of July 1, 2019 and will be down to 10 million by 2050. Baby boomers are typically recognized as the generation born in the two decades following the Second World War. Statistics Canada, for example, defines Baby Boomers as those born between 1946 and 1965.

In the U.S., Boomers own millions of small businesses and employ more than 25 million people, according to the U.S. Census Bureau. That 25 million workers equate to 25 million families, which is closer to 100 million citizens. So, nearly one-third of the entire population of America is reliant on Baby Boomer businesses.

Meanwhile here in Canada, “70% of private and family business owners are planning to sell or pass on their business – that’s 816,000+ businesses changing CEO or ownership” according to PWC research. Transition planning will be crucial to ensure we minimize the threat to the economy, the survival of their businesses, and the livelihood of the people they employ.

However, from a transition planning point of view, a 2017 BDC survey in Canada found that 71% of small to medium sized businesses that are planning to sell are reluctant to take risks to improve their business performance and 52% having little interest in expanding. A staggering 22% plan to wind down their business and sell the assets. These three items will seriously decrease the value of these businesses and put employee jobs at risk.

A crisis in the making?

A survey by Wilmington Trust reveals that the vast majority of business owners are simply not ready for the sale of their business or transition, even as many approach retirement. Their findings show that more than 58% of small business owners have failed to complete a succession plan, while many have not even contemplated a transition or succession plan at any time along the way.

We do have a crisis in the making. Transition and succession planning is critical for Boomers to get the most value when selling their business, to protect their families and employees and to sustain the contribution to the economy.

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