Navigating the Challenges of the Boomer Entrepreneur Exit Strategy

Every once in a while the forces conspire to create a unique event. A unique situation can be either good or bad, but it is always something special. Currently I believe there is a confluence of events that are coming together to form a challenging environment for a large component of the American entrepreneurial class.

I have spent my life as a business owner and entrepreneur. Whether building and selling a family business or as a sole practitioner consultant I have always been self-employed. Throughout my fifty years of entrepreneurship there have always been changes in technology, cyclical economic trends such as globalization, JIT supply changes, interest rate movements, etc. but I believe that we are plunging into a new scenario which is presenting the business owner class with a set of circumstances it is probably unprepared to deal with!

The segment of the self-employed entrepreneur market place which is at the center of the storm are the “Baby Boomers” who now find themselves in a situation which most never

thought that they would be in. How do I move on from my business while maintaining my

lifestyle so that I can enjoy my retirement without having to deal with the current challenges

presented by the economy and rapid social changes.

Business succession is difficult in the best of times but now there are multiple forces at work which make it historically challenging. Business owners who either have no family generational succession plan or employees with the capabilities and/or resources to purchase the owner’s interests, are facing a challenging environment in which to exit their enterprises.

Money is tight. The private equity world, while still looking for acquisitions, is trying to figure out how to exit their portfolio businesses that were acquired for large multiples when money was loose. Therefore, the price many business owners figured that they would receive based upon historical multiples is most likely not going to be achievable now or in the near future.

Strategic buyers are also affected by reticence to purchase businesses that are not necessarily a slam dunk fit, but might still have real value over time with some reengineering. Further impacting purchase prices are the systemic changes the economy is currently experiencing such as the unknown impact of AI, dramatic changes in the global trading system; as well as still tight capital markets for the customers of small and medium enterprises! These challenges in conjunction with individuals who may have unrealistic financial expectations based upon historical multiples creates an environment which, while concerning to some, can become the source of opportunity to others.

The real challenge in my opinion is to create acquisition structures which are motivating to sellers while still realistic enough to entice buyers. The professionals who consult on both sides of the transaction equation I assume are resourceful, experienced, and creative. However; in my opinion there needs to be a fresh perspective on what constitutes a viable deal, not just the historical expectations which have traditionally driven mergers and acquisitions. In order to provide more deal flow, I truly believe that the ability to provide flexible and creative solutions for all parties of interest will unlock a great deal of transaction opportunities. Shared risk as well as reward over a more extended period might just be a way for this to transpire in the future. It will be important for professionals on both sides of the transaction to use their experience, in conjunction with developing a new perspective on what a “good deal” looks like, to unlock values that were not seen in the past. An attitude of half-full as opposed to half-empty opportunities will create improved deal flow. If all anyone looks at are the traditional parameters of what have been the components of an executable deal, then there will still be a lack of qualifying deals. However; the ability to perceive opportunity masked in the finances of a mature lifestyle business and create a shared risk as well as benefit model will in my humble opinion create a new stream of positive outcomes for all parties of interest! One person’s underperforming enterprise might just turn out to be another person’s opportunity or even better a constructive benefit to all participants.