Why 70% to 80% of Businesses Will Never Be Sold: The Looming Retirement Crisis

A striking reality for many business owners is the fact that 70% to 80% of businesses will never be sold. This daunting statistic looms even larger as the baby boomer generation—a significant segment of today’s business owners—reaches retirement age. Without proactive measures, this situation could worsen, leaving countless entrepreneurs unable to convert their years of hard work into retirement security. Here, we explore the reasons why many businesses remain unsellable, how the problem could escalate, and the significant consequences of failing to sell at retirement.

Why Businesses Are Not Being Sold

1. Unprepared Businesses

One of the primary reasons businesses do not sell is a lack of preparation. Buyers today are more discerning than ever, looking for companies with robust financials, documented processes, and clear growth potential. Unfortunately, many small and medium-sized businesses fail to meet these criteria. Owners often overlook the importance of streamlining operations, developing strong customer relationships, or implementing scalable systems. Without these, businesses appear risky to potential buyers, diminishing their appeal.

2. Overvaluation by Owners

Business owners frequently overvalue their companies, leading to inflated expectations of the sale price. Emotional attachment often clouds an objective assessment of what the business is worth. This disconnect between the owner's perception and the market reality makes it difficult to negotiate successful sales. Buyers are unlikely to overpay for a company that lacks clear growth opportunities or is not well-positioned in its industry.

3. Limited Buyer Pool

The market for small and mid-sized businesses can be limited. Finding the right buyer is particularly challenging in niche industries or rural areas, where there is a smaller pool of potential purchasers. This lack of demand makes it difficult to match businesses with buyers, especially at the owner’s desired price.

4. Lack of Succession Planning

Many business owners delay planning for their exit until it’s too late. Without a clear succession plan, whether it’s selling to a third party, passing the business to a family member, or selling to key employees, the business becomes less attractive. Succession planning should begin years before retirement to ensure a smooth and profitable transition, but many owners fail to take this critical step.

Why the Problem Could Get Worse

The impending retirement of baby boomer business owners presents an even larger crisis. Baby boomers, born between 1946 and 1964, make up a large portion of U.S. business owners. According to some estimates, more than 50% of all U.S. businesses are owned by baby boomers, meaning a wave of businesses will be for sale in the coming years.

As this generation ages out, the market will likely become flooded with businesses for sale, which could lead to several challenges:

1. Market Saturation

With so many businesses hitting the market at the same time, supply could far outstrip demand, resulting in fewer buyers available for each business. This imbalance will drive down prices, leaving owners with less return on their years of hard work.

2. Shift in Buyer Preferences

As millennials and younger generations become the dominant buyers, their preferences are likely to shape the market. They often seek businesses with flexible working models, strong digital presence, and a focus on sustainability—criteria that many traditional businesses may not meet. Baby boomer-owned businesses that fail to adapt to modern trends could find themselves particularly disadvantaged in the sale process.

3. Increasing Competition

Not only will sellers face more competition in a saturated market, but buyers will also have more options, allowing them to be pickier. Businesses without a clear competitive advantage, documented processes, or consistent earnings will be at a severe disadvantage when trying to attract buyers.

The Consequences of Failing to Sell

For many business owners, their company represents their largest asset and primary source of income. Failure to sell at retirement can have severe financial and emotional consequences.

1. Financial Instability

Without a successful sale, business owners lose out on the cash infusion needed to fund their retirement. This can lead to financial instability, forcing them to dip into personal savings, continue working longer than desired, or live a less comfortable retirement.

2. Loss of Legacy

Business owners invest years—often decades—into building their company. Failing to sell can mean losing the opportunity to pass the business on to a new generation, leaving their legacy to dissolve as the business closes. For many, this loss is not only financial but also emotional.

3. Unexpected Burden on Family

In some cases, owners may turn to family members to take over the business if they cannot find a buyer. However, without proper succession planning, this transfer can place a burden on family members who may not be interested or equipped to run the company. It also increases the likelihood of family conflict and financial stress if the transition is not properly managed.

4. Forced Closure

In the worst-case scenario, some owners may be forced to simply close the business. A lack of buyers, combined with the owner’s inability to continue managing the company, could lead to its dissolution, meaning the loss of jobs, community services, and the owner’s retirement nest egg.

Planning for a Successful Exit

To avoid the consequences of not being able to sell at retirement, business owners must take proactive steps:

• Begin Early: Exit planning should start years before retirement. This includes preparing the business for sale by documenting processes, ensuring financial transparency, and demonstrating growth potential.
• Realistic Valuation: Conduct a professional business valuation to align expectations with market realities.
• Understand Buyer Preferences: Adapt the business to meet the needs of younger buyers, such as investing in technology, sustainability, and flexible working conditions.
• Create a Succession Plan: Develop a clear plan that outlines how the business will transition, whether to a family member, employee, or third party.

By planning ahead and understanding the challenges they may face, business owners can significantly improve their chances of a successful exit, securing both their financial future and the legacy of their business.

In conclusion, the startling reality that 70% to 80% of businesses are never sold can be mitigated through strategic planning and adaptation. With the baby boomer generation rapidly approaching retirement, the market for business sales is poised to become even more competitive, making it more critical than ever for business owners to prepare their companies for sale and consider succession early. The alternative—financial instability, loss of legacy, and potential business closure—is simply too great a risk to ignore.