The demographic shift means business owners need to build valuable businesses to enhance their saleability. 

Recently I was invited to speak to a group of business owners, members of the Architectural Woodwork Manufacturers Association of Canada.  My topic was related to the demographic shift that is occurring and what that will mean for business owners looking to sell and retire (with money in their jeans).   More sellers, fewer buyers means challenges to owners who aren't prepared. 

Impact of the demographic shift.

Baby boomers are - or are soon to be -  selling their businesses to retire. The headwinds owners will face is the gap between the numbers of businesses that will come available for sale vs. the numbers of likely business buyers.  That pool of buyers is the generation following the baby boomers. There are 50% less of them, born between 1965 and 1983. What this demographic shift means for business owners is they will have to make sure they are building value in their companies so they are attractive to buyers. In addition, many of those Gen-X buyers won’t have the capital to purchase a business and will expect payment terms. 

Key facts:
Approximately 75% of businesses never sell due to a lack of planning
93% of owners do not a have a formal ‘life after business’ plan
75% of of business owners “profoundly regretted” the decision to sell just 12 months after selling

Baby Boomer business owners are eventual sellers. 

If this is you, my best advice is to do the work or get the help you need to build value in your company.  Understand what that means specifically,  know the value of your company and where it ought to be.  When you you have a prospective buyer you want to do a deal with you could look at getting a deal done with a Vendor Take Back.  This means you could self-finance a portion of the purchase price or finance part of the transaction through a loan making your business more attractive to a buyer.

Who are the possible buyers for your business?

Some buyer types will generate higher sale prices. Understanding who to target will  allow you to be strategic when it comes time to sell and secure the best price for your business:

Buyer Type:                                             Price of Transaction:

Go Public or bought by PubCo …………………......................... Highest

Synergistic Buyer………………………………………………………………Next Highest
 - Competition – Supplier – Vendor                                                         

Private Equity / Family Offices (Want ROI) …………………….High
 -  May have to stay on as Executive…………………………...  Good Multiple
 -  Buy 75%

Private Buyer Transaction……………………………………………………Possible Good price
 -  Lengthy due diligence
 -  Detailed Representations & Warranty

Management Buy Out………………………………………………………..Possible
 -  Internal Sale ………………………………………………………………… Fair Price
 -  Easier due diligence …………………………………………………….. Over Time
 -  Highly Financed
 -  Vendor Take-back / Terms

Family Transfer ………………………………………………………………. Lowest Price
 -  Next Generation …………………………………………………………. Over Time
 -  Offer Terms
 -  May take years for payout
 -  Family dynamics
 -  Are acquirers capable?

Secret sauce to a successful exit:

It really comes down to being prepared, planning your goals and making sure you have the time to build value in your company. The result?  You have a business people want to buy and maximize the sale proceeds for your retirement or next business adventure. Ask yourself these questions:

·  What obstacles are facing you over the next decade?

·  Who will your most likely buyer be?

·  What type of a sales transaction will occur?

·  How will you accelerate value?


“Exit Planning  is the process of developing a strategy for the biggest financial transaction of a lifetime.”

Best advice: get an accurate picture of your options well before you are selling your business.

The benefits of going through the six steps of Discovery  with a trusted financial advisor are many and personal.  It will provide you with an accurate picture of your current situation both in terms of  business and personal.  Here is what my Discovery Process entails:

Discovery process

  1. Goals Assessment: Business, Personal, Family & Retirement
  2. Financial Needs Assessment: How much do you need (and want) for retirement?
  3. Business Valuation: What’s the current value of your business? How does that compare to similar businesses? What do you need to do to build value? Complete a business value driver assessment to learn areas that need work.
  4. Exit Options Analysis: What is your best road to a successful exit? Look at the options in the context of your goals, what is realistic in a timeframe that makes sense.
  5. Net Proceeds Analysis: [Asset or Share Sale] Understand the implications of a transaction. Get the help you need to evaluate the deal structure and how that will impact taxes.
  6. Action Plan: Prioritize task list to build value and de-risk the business; identify accountabilities for key team members; track and measure progress

Over the years our clients have shared with us their key take-aways from the Discovery process. They commonly include relief, clarity, understanding and insight.  Here is their feedback:

"...organization and cataloguing of all my personal and business agreements, documents, records and tax files."

"Clear understanding where any document conflict exists and what is missing."

"Understanding the value of my business and which valuation method would be most appropriate for me."

"Insight into possible uses of debt vs. restructure capital to accelerate growth."

"Tools to develop a SWOT analysis (both personal and corporate)."

"Ability to create a succession exit plan and sequence the timing."

"Lucid ability to develop a corporate structure to minimize tax on future transaction and maximize current cash flow."

"Benchmark your company against the same industry in both Canada and USA."

"Clarity on my personal net worth and what is available to create a revenue stream and retirement income."

"Ability to develop a retirement projection and start to craft a plan."

"Explanation of a comparison of your internal value drivers and how to accelerate the value of your business quickest, i.e., go for the low hanging fruit."

"Implement a contingency plan, i.e. your own company fire drill."

"Ability to assess of your own internal exit readiness and awareness of any roadblocks moving forward."

"Clarity; a plan + your timing."

"Access to “Trusted Advisor™ Network” of succession exit planning trained and the best in class transaction specialist advisors in the marketplace."

Interested in seeing some real life examples of business owners who are working on building value in their companies? Click here for our case studies including a  specialty wood manufacturer, a wholesale food distribution/logistics company and a metal fabrication manufacturer and  services company.

Call or email me if  I can answer any questions on how you can get started to prepare your business for sale and beat the demographic headwinds.

- John