8 Ways Baby Boomers Are Risking Their Business Legacies

66% of all businesses in the United States are owned by Baby Boomers (currently, age 67 or older). As time marches on, these owners will retire at an accelerated rate. Some will leave incredible business legacies that will be talked about for decades after they’re gone. The businesses they ran will thrive for years to come. They’ll be referred to as business visionaries. Their actions will be used a core teachings of key business principals to employees.

At the same time, a new study by UNC’s Business School shows more than half of these business owners may be risking the business legacies they’ve worked so hard to create. Why? Failure to account for the ‘brain drain’ is occurring at a rapid rate. 63% of all businesses run by Baby Boomers have admitted to not accounting for the impending brain drain (which includes themselves!). As a result, they will be at risk of:

• Failing to get the price they wanted for the business when they are finally ready to sell.
• Set the business up for failure upon their departure.
• Being remembered as short-sighted, or even worse, failures as business owners.

This infographic highlights the severity of the problem:

A Tidal Wave Of Boomer-Run Businesses for Sale = Potential Disaster For Owners

I spoke with Sean Healy, Managing Director of Currahee Capital, who specializes in acquiring small businesses ($10-25M). He works specifically with owners focused on leaving a positive, lasting business legacy. Currahee says Baby Boomer owners who want to be remembered for the impact their businesses had on customers and employees are more likely to account for the common roadblocks to lasting legacies. “I prefer to partner with talented business owners who spent their entire lives building their businesses, and now, want to make sure they can not only reap the rewards, but ensure it carries on after they are gone,” Healy states. However, while Healy is working with some savvy Baby Boomer, the data shows those that don’t prepare the right exit strategy at the right time will suffer. The sheer volume of Baby Boomer businesses is going to heavily impact the sale of these companies. Some statistics that speak to this include:

• Ten TRILLION dollars worth of businesses will change hands by 2025, according to several experts.
• An estimated 65% to 75% of small companies in the U.S. – some 10 million – will likely hang up a "for sale" sign during the next 5-10 years, according to magazine.
• Research from the Pew Research Center indicates that the oldest of America’s baby boomer generation started turning 65 on January 1, 2011, at a rate of 10,000 people a day — a trend that will last for the next 19 years.

The reality is, building a business and selling one are two entirely different things. Which means, not prepping properly for the exit results in more than a few owners disappointed and with lack-luster business legacies.

8 Ways Baby Boomers Are Risking Their Business Legacies

Here are the most common mistakes are:

1. Ignoring retirement. While most business owners never want to retire, the day will come when the demands of the business will be more than they can handle. Planning for that day will make it easier to transition. It will also help with the next potential mistake…
2. Failing to plan for life-changing events. You may feel healthy as an ox, but an unexpected illness, or situation that requires your time and attention could put your business at risk. Having a plan in place for an unexpected exit is vital to maintain the business legacy.
3. Inability to see waning passion. Losing that ‘lovin feeling’ for your business is normal. Years of doing the same thing without any significant opportunities for growth or change can lead to burn out. Failing to address this can make you lose your edge, and put your business at risk of losing it’s positioning in the market.
4. Ill-prepared multi-generational ownership. Just because your kids work for the business, doesn’t mean they should run the business. Failing to accept that your children may not be the best future leaders of your business is important if preserving the business for years to come is a legacy you wish to leave behind.
5. Diluted ownership via too many equity partners. If you’ve been appeasing managers and other key team members with equity, you now have their interests to consider when it’s time to sell. Too many cooks in the kitchen can make your ability to exit on your own terms next-to-impossible. You need to start to build consensus before it’s time to sell.
6. Lack of youth in management. If your entire management team is within five years of your own age, you’ve put your company at risk of a massive brain drain in a short time frame. Not having key members who plan to stay on long-term makes the business less likely to sustain after all the key players retire.
7. Misguided employee ownership plan. Assuming your top employees will want to take over the business can lead to a rude awakening when you realize they are A) not really capable of leading and making the tough decisions, or B) never really saw themselves taking over for you.
8. Unrealistic business valuation. Just because you heard your competitor sold his business for $X Million, doesn’t mean yours will too. Market conditions, business positioning, debt, etc. all play a factor. You could be assuming you’ve got your retirement nest egg all set when you sell, only to find out your company is worth a lot less than you expected.

Being Objective Is Key to a Sustainable Business Legacy

Healy says the solution to ensuring a business legacy stays strong and impactful is to get objective about your current situation and minimize the chance that any of the eight mistakes above can occur. Bringing in an outside expert to look at your situation will provide you with a much needed set of ‘fresh eyes’ that can help you see what you might be blind to in your business.

Your Business Legacy Is Your Lasting Imprint on the World

If you are one of the four million Baby Boomer business owners who have shaped our society, don’t let poor planning of your exit be what people remember most about your business legacy. Your departure is one of the most significant aspects of how you’ll be remembered by employees, peers, and your industry. It’s time to make sure your reputation stays in tact.

P.S. - Have we met yet? First, thanks for reading my article! I have the privilege of being the CEO of CareerHMO.com. Besides writing for LinkedIn, I also write column for INC Magazine is called "Workplace Referee." I invite you to CLICK BELOW on some of my most popular articles:

8 Workplace Personas - Which One Are YOU?

3 Reasons Millennials Are Getting Fired

How to Get 1,000,000 Followers on LinkedIn

7 Signs You Should Take That (Scary) Risk

9 Signs You Should Run From That Job Offer

3 Reasons to Quit Making Excuses & Start A 'Hobby Career'

The New Type of Company Everybody Wants to Work For