Part I: Building Business Value Series
July 12, 2016
This monthly blog series focuses on the important challenges business owners and the Connecticut economy face within the next two to five years. Subsequent blog posts will define business drivers, how they affect the value of your business and help you gain insight into your operational strength while identifying the value gap (the difference between what your business is worth and could be worth).
The baby boomer generation, born between 1946 and 1964, used to comprise the largest population boost in American history (now bumped to second largest with the arrival of the millennial generation).
Nationally, 70 percent of all businesses with more than one person on the payroll, or 4.2 million companies, are owned by baby boomers.¹ In Connecticut, 39 percent of small business owners are over the age of 55 according to a Main Street Alliance analysis of the U.S. Census Bureau’s Survey of Small Business Owners Public Use Microdata Sample.
On the cusp of retiring, more than one million small business boomer owners face a laundry list of to-dos due to looming decisions on selling their companies or turning them over to the next generation within their families.
- replacing employees who are also planning to retire – management
- increasing business value and reducing the value gap
- financials and consistent growth – ensuring documentation is in order and accessible
- customer diversification – developing a strong customer mix
These critical drivers can help you add value to your company, elevate its worth beyond mediocre stability and ensure a comfortable retirement.
What makes the retirement planning and subsequent business transitions challenging is that historic data shows a large percentage of businesses that are listed are never sold (see “Selling with CoreValue” bar chart). Not knowing which value drivers have the greatest impact on your business, which ones potential buyers may be looking for when considering a business and which ones you may be neglecting, may result in your business being passed over. Once these value drivers are determined, taking steps to identify and make the necessary changes will set you apart from other businesses, making yours more attractive to buyers.
The small percentage of Gen X successors coupled with the less-experienced millennials makes for a weaker hiring pool. So, what are your next steps to getting your business in order? Do you have the latest manufacturing equipment such as automation or robotics? Is it in good, working order? Are you courting the next generation to fill the soon-to-be-vacant roles in order to carry on your established business? If you’d like to learn more about CONNSTEP’s services, please contact us at firstname.lastname@example.org.
Next month, in Part II of our Building Value series, we will look at assessing talent shortages, examining the most common business owner issues that may detract from making your business more attractive to potential buyers and how to continue addressing your value gap.
- United States Census Bureau, Statistics of U.S. Businesses, http://www.census.gov/econ/susb/
- Thomas L. West, The complete Guide to Business Brokerage, p. 36
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