According to CNBC, 58% of baby boomer business owners plan to sell their businesses within the next five years, but many are dangerously unprepared for this critical financial event. The Exit Planning Institute’s 2023 data shows older owners are most likely to contemplate sales, yet they often dramatically overvalue their companies and fail to delegate properly. Business transition experts warn that owners who can’t prove their company operates without them command lower sale prices, while those without proper valuations risk selling for far less than needed for retirement. One landscaper in his early 70s discovered his business was worth “far less than he had expected,” potentially forcing him to work into his 80s. Consultants emphasize that assembling an experienced advisor team years before selling is crucial, yet most owners neglect this until it’s too late.
The harsh reality check
Here’s the thing about business valuations: everyone thinks their baby is the prettiest. That’s literally how one exit planning expert put it. Business owners routinely talk to their CPAs or other owners who aren’t in the buying market, leaving them with completely unrealistic expectations about what their life’s work is actually worth. The scary part? Private equity firms know this and actively look for unprepared owners they can snatch up on the cheap.
So what’s the solution? Get a professional valuation every one to two years, starting at least two years before you plan to sell. It sounds like an expense, but it’s actually an analysis tool that helps you run the company better. More importantly, it prevents that gut-wrenching moment when you realize your retirement plans just evaporated because you overestimated what your business was worth.
The delegation dilemma
This is where it gets really interesting. Consultants ask owners a simple question: what happens if you’re gone for a month? If the answer is “the business would collapse,” you’ve got a major problem that’s costing you real money. Businesses that aren’t owner-dependent sell for higher multiples. Basically, if you’ve built something that can’t function without you, you haven’t built a business – you’ve built yourself a job.
The consequences of poor delegation can be brutal. One couple owned a lucrative distribution business until the husband had a stroke in his mid-60s. The wife wasn’t involved, the husband couldn’t remember where documents were stored, and their financial advisor had never handled a business transition. They had no next-step plan because he was “just going to keep working.” Sound familiar?
The retirement math doesn’t add up
Most owners don’t know what they actually need for retirement on an after-tax basis. They might get an offer that seems good, but without crunching the numbers properly, they could be setting themselves up for financial disaster. That bakery couple in their late 60s? They sold for less than hoped and now work part-time to supplement retirement. Had they valued the business years earlier, they could have strategized to drive more value and hired people to reduce their physical workload.
And here’s something most people don’t consider: what happens after the sale? Boomers need to think about what comes next – volunteering, traveling, starting another business? Selling isn’t just about the dollar signs. Without a plan for your time and purpose, you could end up bored and dissatisfied even with a successful sale.
Why you need to start now
Look, if you’re thinking about selling in a few years, you should be building your advisor team right now. That means CPA, investment banker, financial advisor, and attorney – and don’t assume your current team has the experience needed. Many business owners are so wrapped up in day-to-day operations that they neglect this crucial step until it’s too late.
The bottom line? Proper preparation should actually invigorate you. Knowing your business’s true value, having a team that can run it without you, and understanding your retirement needs takes the uncertainty out of the process. Otherwise, you’re just rolling the dice on the most important financial event of your life.
