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Essential Tips for Baby Boomers Looking to Sell their Business
A large portion of baby boomers are business owners because the scarcity of jobs when they entered the workforce drove them to create their own jobs and become entrepreneurs. As many of these baby boomers are retiring and exiting their company, the need for information about selling businesses, particularly in planning and preparing for the sale, is becoming increasingly prevalent. John Dini is an exit strategy coach and president of MPN Inc, which aims to help business owners, mostly baby boomers, in transitioning from their business. In his conversation with Deal Talk host Jeff Allen, John discusses why it is important for business owners to have a plan first before putting their business up for sale. Aside from talking about the questions that need to be addressed before the sale, he also provides tips to help business owners prepare for the transition from business ownership.
Questions Answered For You
- How many business owners have a solid exit plan in place after being in business for many years?
- Why is it problematic for the owner and for the whole company to not have an exit strategy?
- What are the biggest concerns or questions that baby boomer owners need to address to prepare themselves to transition away from business ownership?
- What are some basic tips or guidelines that can help business owners begin to think and plan more earnestly for the sale of their business and transition to the next chapter of their lives?
When a successful business closes, it's almost always a case of the more you work in your business, the less it is worth.
Key Takeaways To Remember
- Legacy is important. Making sure the company survives and thrives after the owner has sold the business is paramount.
- Business owners identify with their company, so they should have a clear vision for after they exit the business. If an owner doesn’t know what their plans are after the sale of their business, then the transaction's likely to go badly.
- Preparedness is important when selling a business. A business owner should put processes in place so that a third party could take over what they are doing. Sharing and teaching others what they know on how to run the business is essential. The more a business relies on one person, the less its value.
- Business owners planning to sell their business should seek help from a professional who understands business and value drivers to take a realistic outside look at their business. The professional will help them gauge whether they meet buyers’ expectations compared with competitors.
From our studio in Southern California, with guest experts from across the country and around the world, this is "Deal Talk", brought to you by Morgan & Westfield, nationwide leader in business sales and appraisals. Now, here's your host, Jeff Allen.
Jeff: Hello and welcome back to the web's number one content source for small business owners committed to building a business for eventual sale. Here on "Deal Talk," it's our mission to provide information and guidance from our growing list of trusted experts that you and all small business owners can use to help you build your bottom line and improve your company's value.
One thing we like to do here on "Deal Talk" when we can is speak to those individuals who have an opportunity to work directly with people who are in a transition or considering transitioning from their business to the next chapter of their lives, whatever that might be. And this is a particularly interesting time in our history here in the United States as entrepreneurs, as business owners, people who are looking at building a business for sale whenever that might be.
But right now, in particular, is a time when we've got a lot of folks who are exiting or thinking about exiting. And this is a very large group of people known as the baby boomers, right? We've all got them in our families. I'm kind of yours truly right here, just on the closing end, the fringe, the last vestige of those baby boomers if you were born in the early 1960's.
I've got a guest here with me today on "Deal Talk" that I'd like you to meet. His name is John Dini. He is a speaker, author, and exit strategy coach, president of MPN Inc. And John has a chance to work and talk with baby boomers from all over the country about doing one thing, about exiting their companies. And he is someone with a tremendous amount of skin in the game.
John, first of all, before we get started I want to say hello, welcome to "Deal Talk," nice to have you join us today.
John: Thanks for inviting me on, Jeff.
Experience is what you get when you don't get what you want. We learn very little from our successes.Jeff: Thank you for making time for us. John, you have a great perspective in the area of helping business owners sell their companies, but not just any business owners who are a very large portion of them; however, those baby boomers out there who own such a large percentage of businesses today. But at the same time, they form a very large group who are exiting. And what I'm interested to know is someone who specialized in helping thousands of baby boomers prepare to exit their businesses.
What can you tell us about the important role that this generation — perhaps some of them are grandparents, or uncles and aunts — that they've played in the development of not only the American economy but also the concept of entrepreneurialism?
John: Well, Jeff, the reign of the boomers, the pig and the python is an anomaly in our history. The circumstances that brought it about, which was World War, led to this explosion in children until the point where by 1965, 40% of the United States was under 21 years old. That's the profile that we would today consider to be a developing nation.
John: The world became oriented around children whether “Dr. Spock's Baby and Child Care,” the best-selling book of the 21st century outside of the bible, and so many other things were built around the boomers. They became accustomed to being the center of attention. They're fastidiously called the “Me Generation.”
They fueled 40 years of growth in our economy. But there was an irony to it, and I call it scarcity in a time of plenty. While the economy was growing by leaps and bounds because of all these new workers and new consumers that came into it, there was scarcity in the sense that every ambition a boomer had, five other baby boomers had the same ambition. They all wanted a corporate office. They had been raised to believe by their World War II parents that success was their birthright. They could be president of the United States. They could be chairman of General Electric. They could be anything if they so choose.
And there was a lot of disappointment as they came out of college in record numbers and lined up outside corporate America waiting for their corner office fast-track jobs and found out that somebody else had gotten there first, and was probably going to be there for the next 30 to 35 years, so waiting wasn't an option. That scarcity became what drove boomers into entrepreneurial pursuits like no other generation before.
When I calculated all the numbers I think boomers were about two and a half times more likely to form a business than the generations before or after. And that was because they identify with what they are, they identify with what they own. The trappings of success were critical to the boomer's self-esteem. And if they couldn't get the executive job that was going to provide it, they're going to find another way. And that way was the ownership of a small business.
Jeff: It's truly fascinating when you really consider what the overall general mindset was to have that corner office in corporate America. And then they ended up actually having to set that idea aside and then go into business for themselves. Did college prepare them for that though do you think, John? If they didn't have that corporate background and then were left to, if you would, fend for themselves and start their own business, were they equipped adequately to be able to start their own businesses, do you think? Or did they just have to, like we do today, make their mistakes and learn from them?
John: Let's say college prepares them just as well as it prepares young people today for a business career, which is not very.
Jeff: It's true.
John: They were educated, but most of them weren't educated in business, certainly the explosion of MBA programs wasn't until the late 1980s or early 1990s. They came out with English degrees, History degrees, and Biology degrees, and it was good training. As an employer, it was an indication that you could set a goal and stick to it because the boomers are achievement- and goal-oriented, but they weren't really business-trained.
Fortunately, what really sprung up at the right time, at a fortuitous time both for the American economy, for American consumers, and for boomers who wanted to be entrepreneurs was the dawn of franchising. I give this lecture around the country about what made the boomers the boomers. From 1975 to 1986, in those 11 years, franchising saw its annual sales increase by 1,100%.
John: They went one from under 2,000 franchises sold to over 22,000 franchises sold a year in that period of time. And what was driving that was boomers looking for better income than a nine-to-five job could offer them. And what drove the success of the businesses was other boomers who were too busy in two income families going out, earning the money to acquire this stuff that they wanted, to do those service jobs that we did for ourselves, whether it was cooking, or cleaning, or doing homework with the kids, or teaching them how to throw a baseball, we outsourced all that.
Jeff: John Dini, speaker, author, and expert strategy coach, president of MPN Inc. is my guest. My name is Jeff Allen. You're listening to "Deal Talk." In your conversations with your baby boomer clients, John, what do they think of today's business climate versus the old days? They knew that they had it tough. They were able to overcome those obstacles then and they succeeded, but what do they think about it today as they’re making plans to leave or maybe after they've already left?
John: The business climate has clearly changed. I ask my clients this all the time, "Do you think you could start the business again today?" And most of them say no. The two reasons they say that are, one, because of regulation. Because so much of their time or their employees' time now was taken up with dotting t's and crossing i's, filing for permits, getting permission, licensing, and auditing of their various work. For those that bootstrap their companies out of the trunk of a car or their garage, you can't do that anymore. You just can't meet the regulatory requirements.
And the other reason is so many of the boomers started really successful companies. With successful, I mean 50, 100, 200 employees, $5, $10, $25, $15 million worth of revenue, and they bootstrapped them. They made them work through their own effort, through hard work. And most of them don't believe that hard work alone is enough to really get you over the top anymore.
Financial gain is great when you sell your company, but for many, many of the owners that we work with, the more important thing is to make sure the business, the culture, the employment, and the services that the customers are used to survives.Jeff: What do you think today's entrepreneurs, let's talk about the XY and millennials, could learn from baby boomers then? You may have just touched on something when you talk about hard work. Then your clients say, hard work just isn't enough to get by anymore. But what is it that we could learn from those baby boomers, from the older generation that would be of greatest value toward running a successful business today for maybe those young people who are either in college, or maybe those 30- and early 40-somethings who are working a desk job or tired of doing what they want to do and they want to start their own business now?
John: Obviously, as a boomer, I'm biased. Every generation has complained about the work ethic of the generation that follows it. There’s a quote by Aristotle bemoaning young Greeks being lazy and unproductive.
I think what they really need to learn from the boomers — especially the millennials, Gen X not so much, but the millennials certainly — is that personal contact is a good thing. I can't imagine a lot of these younger folks running an establishment where they have to deal with customer complaints or returns or push back of any sort, or have to go out and shake somebody's hand and talk to them face to face about why their product or service is the one they should buy. They want to text them. They want to send mass emails and have the business roll back in, and it's really becoming an issue.
I have a friend that's a professor in college and he studies the millennials. He asks a great question in his course. He says, "How many friends do you have?" The students will all say, "300, 700, a thousand, two and a half thousand." "And how many of those would show up at the emergency room at two o'clock in the morning to pick you up after an accident?" Silence. Because they just don't have that person-to-person contact that forms relationships. And that's key to what makes so many boomers successful in business.
Jeff: It's funny, we do hear from time to time, John, when you're out there and about, at least I certainly do. We continue to hear the drumbeat, depending on what business you have, that relationships do matter, that relationships are critical in order to have that long-term client, that client who is willing to stick with you through the good times and the bad. They may not be buying $100,000 of product from you every year, but they're going to be there. The importance is to keep them happy.
But you seem to think that that is lost on the newer generations today. And that sounds like certainly an advantage that the older clientele that you may have or that we know of, the older generation, they had an advantage of being able to form those relationships and pick up the telephone and meet with someone for lunch, or hop on an airplane or something like that to be able to wine them, and dine them, and see them once a year at least to keep up appearances.
With that as a backdrop, as a frame of reference, you mentioned that your clients said that they probably would not be able to start in business today or start over again. But let me ask you in a slightly different way, if they were to start over now, do you think, with all that they knew then and what they know now, even if they're not experts with social media, for example, how do you think most baby boomers might do? If we had a contest, you have them over on one side on the left and you have the new entrepreneurs today on the right, how do you think they might do?
John: Well, you said knowing what they know today. Obviously, there's no substitute for experience. Experience is what you get when you don't get what you want. We learn very little from our successes. Boomers know how to avoid pitfalls. Experienced business owners just instinctively know the kind of “don't do that” reaction because of what they've been through in the past.
But if we're talking about starting in 2017, I think it's a different world. I think business models are very different now. Their dependence on technology, their dependence on national branding, the noise that's out there that they have to get through. Boomers who go into service businesses, whether it's professional services, residential services or business-to-business services, I think would do very, very well. The question is how long are those services going to be able to survive in the face of all the other models that are coming out, the disruptors, and the arm's length, do-it-for-yourself models.
A friend of mine, an influential technology guy, just wrote a whole post on disintermediation. I wouldn't tell a boomer or an X'er to go into one of the intermediary businesses right now. I'm not sure what the future is for real estate agents, insurance brokers, or distribution companies.
Jeff: Interesting point. You're listening to my conversation with Mr. John Dini. He is a speaker, author, and expert strategy coach, president at MPN Inc. My name is Jeff Allen. John, when we come back what we'll do is we'll take a different track, and we're going to talk a little bit more about preparedness. And your perspective on preparation and readiness of baby boomers for exiting. This is the sweet spot for you. This is your business, and we want to get your thoughts on this when "Deal Talk" resumes right after this.
If you'd like to share your knowledge and expertise on any subject related to selling businesses or helping business owners improve the value of their companies, we'd like to talk with you about joining us as a guest on the future edition of "Deal Talk." Interested? Contact our host Jeff Allen directly. Just send a brief email with "I'd like to be a guest" in the subject line. In a brief message, include your name, title, area of specialty, and contact information, and send it to email@example.com, that's firstname.lastname@example.org.
Selling your business may be the most important business transaction you'll ever undertake so don't go it alone. Work with an organization that has made it their business to sell businesses, and that's all they do. Morgan & Westfield at 888-693-7834. At Morgan & Westfield, we know that selling your company is not something you should take lightly. It can be a stressful, difficult, even emotional process. That's why it's important to work with a team whose one and only specialty is selling businesses throughout the United States. And Morgan & Westfield will help you every step of the way, from helping you plan your exit strategy, to preparing a comprehensive appraisal and locating the right buyers.
Without the right team behind you, you could be leaving money on the table. So don't leave your most important business transaction to chance. Call Morgan & Westfield for a free consultation at 888-693-7834, 888-693-7834, or visit morganandwestfield.com.
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My name is Jeff Allen today speaking with Mr. John Dini. And he is an expert in this area of exit strategies and helping business owners plan their exit, so they can not only exit gracefully of course, but they can also hopefully profit from a well-timed, and not only that, but a well-planned exit.
That's an area that I think many business owners may not necessarily get a passing score in. And particularly, if you are a younger business owner and you're just getting started. Maybe you're more concerned about lifting the value of your company or growing your business.
But, John, it does beg the question though, in all honesty, we've got a lot of people right now retiring, a lot of folks making plans to move into that next stage in their lives and that means leaving their companies, selling their business. Of those business owners who are retiring out right now, they're done, they're ready to go and go fishing, or hunting, or do any number of things, travel, whatever it may be, those folks who want to sell their companies right now. How many do in fact have a solid exit plan in place after being in business all these many years?
John: Not enough, that's the simplest answer. I lean on evidence from two surveys, one back in 2008, but I don't think it would change one bit today. PricewaterhouseCoopers, before they were PwC, surveyed business owners and asked, “what is your exit plan?” Eighty-five percent of the owners said, "I'm going to sell to a third party in five years." Eighty-five percent of all 60-year-olds said, "I'm going to sell to a third party in five years." Eight-five percent of all 65-year-olds said the same thing. Eighty-five percent of all the 70-year-olds said the same thing. It doesn't matter what age they were or what point in their career they were asked, they all said selling to somebody in five years. That's kind of become axiomatic for "I haven't thought about it, and I don't want to think about it."
As recently as 2014, the Business Enterprise Institute did a survey about which professionals were helping business owners plan their exits. And they found that less than 25% had talked to either an accountant or an attorney about eventually leaving their company. And those were the two most named professions. Everybody else was in the single digits.
Jeff: Accountants and attorneys?
John: I think it's fair to say about three-quarters of owners are not planning.
Jeff: Oh my gosh. That's staggering. Of course, it means that you and people like you, John, have plenty of work, and obviously, it's got to be nice. But it is, at the same time, staggering because while you've got a business owner, an entrepreneur who takes a lot of pride in his work and what his company has had to offer his clients for all these many years, and his business is a well-oiled machine, he or she has no plans for leaving, and that makes it difficult on the company. Why?
Why is that problematic to not have an exit strategy not just for the owner themselves but for the company as a whole?
John: Well, companies are immortal. They'll go on forever if you build them that way. And certainly, your employees and your customers are not planning to be left in the lurch on the day you don't feel like going to work anymore. That would be pretty inconsiderate. Legacy is important.
Financial gain is great when you sell your company, but for many, many of the owners that we work with, the more important thing is to make sure the business, the culture, the employment, and the services that the customers are used to survives. They build their exit plans not around every last dollar they can squeeze out of it but around how do I maintain these relationships, which we spoke about before, and how can I leave without people feeling that I've abandoned them.
Jeff: There's really a deeper ideology or reason for a more constructive strategy here. It's, as you said, it's not simply for financial gain. That's going to come likely as long as they're well prepared and their books are in order, and everything is tidied up. But the fact of the matter is, the financial rewards at the end of all of this are just a part of the really important reasons to have your act together, to have your exit strategy in place.
What do you think are the biggest concerns or questions that baby boomer owners need to address in order to prepare themselves? And not just their companies, but to prepare themselves mentally and get their head wrapped around this in order to transition away from business ownership.
John: Number one and number one with a bullet is, “what are you going to do after the sale of business?” Business owners identify with their companies. They built them by their own hands. Everything in them is a result of their influence, and most small businesses up to mid-market businesses, they pick the furniture, they taught everybody how to do the jobs, they landed all the original key customers themselves.
I used to do business brokerage, I don't any longer. But one of the things that I always made sure of, and I talk about it in one of my books that I wrote, is what is the vision for after the business. If an owner can't tell you, if the owner says, "I don't know, I'll figure that out when it comes along," then the transaction's going to go badly. Because the closer they get to that big, black void of having no identity to their family, to their community, to the people in their church, when they lose that identity, they don't know who they are. And the closer they get to that event, the more problems they find with the transaction.
Companies are immortal. They'll go on forever if you build them that way.
Jeff: And it's a frightening place to be and particularly if you, all of a sudden, need to get out and you need to speed up that transition much more quickly, whether it be for health-related reasons or something like that. One of the things, John, we hear about from time to time, stories about successful businesses, legacy businesses they were in the community for years and years and years serving the local clientele and customers, and then all of a sudden we drive by one day and they're just closed up. Or the owner just decides to retire and doesn't really have anybody to take over his business. He just closed his shop and that's it.
When we hear these stories and based on what you know from being in the middle of all of this and working with baby boomers, in particular, these stories that involve them. Is it really a matter of not having a strategy and not knowing what to do, how to transition your business, how to sell and profit from that, and get the rewards that you're after? Or is it one of those things where some of these folks think, "You know what, no one's going to want this. It's outdated and I've been here a long time, and there are other people doing what I do. There's no value involved here in my company."
John: And you said successful business. Obviously, some industries go away. There's probably a buggy manufacturer somewhere that's still surviving, but not many. In that case, it's a business that just hasn't failed because the owner didn't need much out of it to keep it going. But when a successful business closes, it's almost always a case of the more you work in your business, the less it is worth.
The owner was doing too much. He or she didn't teach others how to produce what he was producing, didn't teach other people how to manage, didn't put in processes so a third party could take over what they were doing. It's still an owner-centric operation. And quite frankly, it may look like a successful business from an outsider, but it's just an owner with a job and a lousy boss.
Jeff: Working in the business and on the business at the same time. And he plays a boss, owner, and employee all at once, except for maybe Matthew comes in from time to time to take some phone calls and do the books.
What are some basic tips then, John, to close out? And we could go on and on, and this has been a very, very enlightening conversation, very eye opening. What are some basic tips or guidelines that you would be willing to share at this time, as we wrap here, that can help those boomers in our audience begin to think and plan more earnestly for the sale of their business and transition to the next chapter of their lives, even if they're thinking, "You know what, I'm never going to retire. This is just the best damn thing in the whole world, and this is my hobby too." But what can you do to share with us the types of things that can make us better prepared when we're eventually ready to say, "You know what, I think I'm going to go ahead and hang up my shingle here."
John: I think one is get realistic outside look at your business, someone objective. And when I say “outside look,” I don't necessarily mean an appraisal, I mean a professional who understands business, understands value drivers, and can tell you where you meet expectations or not as far as in a buyer's eyes compared to others in your industry.
There are tools out there like Sageworks that most people, accountants and virtually all their banks subscribe to where they can run metrics against other people in your exact same industry. And believe me, in this day and age of the internet, if you're going to sell to a third party, your buyer is looking up that information. And you don't want to be selling to somebody who knows more about your business than you do.
Jeff: Amen to that.
John: And then training successors, whether you want management to help a new owner get off on the right foot or whether you're training them for employees to be your eventual successors in ownership and buy the company from you. Either way, training is absolutely worthwhile, and you have to build a team.
And if you don't mind me putting in a plug, there are a lot of free resources that we put on yourexitmap.com. There are tools up there, assessments, educational materials, and articles just posted all over, and it's all free. We're missionary about business owners understanding that they need to start planning.
Jeff: John, not only do I not mind you giving a plug, but I do encourage you now to give your telephone number and email address, or whatever you'd like to leave us for anyone who might be listening to this program right now who likes what you've had to say to this point and who would like to take advantage of some of the free materials. But also may want to speak with you on a deeper, more confidential level about their own particular situation, and to perhaps work with you and have you work with them a little bit about how they can better prepare themselves. How can they reach you?
John: Our phone number is 800-653-5405. They're welcome to email me at email@example.com.
...you don't want to be selling to somebody who knows more about your business than you do.Jeff: John has, like he mentioned, a tremendous wealth of resources for you to take a look at, and he's got a number of different websites out there. We were really just blessed to have him on our program today. John, I want to thank you so much for your time. This has been a great conversation. And again, I think it's one that we could probably have expanded a little bit, but we have run out of time. Thank you so much for joining us today on "Deal Talk" and hopefully we can have you back on the program.
John: Thank you, Jeff, and I hope I was of help to your listeners.
Jeff: We appreciate it. That's Mr. John Dini right there. Great call, great conversation. Speaker, author, exit strategy coach, president of MPN Inc., John Dini. I hope that you enjoyed this program.
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