The Wave of Retiring Business Owners

Contents

1. The generation and its calendar
2. How many businesses they own
3. The jobs attached
4. How many plan to sell
5. How many actually do
6. The years the sales were delayed
7. What goes wrong at the sale
8. Small towns
9. Nebraska farms
10. Who buys

Brent O’Mara works with business owners and multigenerational families, and the backdrop to that work, in business succession above all, is a demographic fact with a name attached. Peter Christman, founder of the Exit Planning Institute, told a business broker writing for the New York Times in 2011 that as many as 75 percent of business owners suffered from what he called a disease caused by a lack of exit planning; a 2008 study he cited found that 96 percent of baby boomer owners agreed an exit strategy was important and 87 percent had no written plan.² Every figure here follows from that diagnosis.

The generation and its calendar

The baby boom generation, born from 1946 through 1964, began turning 65 on the first day of 2011. Pew Research Center calculates that roughly 3.8 million boomers reach that age each year between 2011 and 2029, about 10,000 a day, though 10,000 are not leaving the labor force daily; the boomer workforce has shrunk by about 2.2 million a year since 2010.⁹

How many businesses they own

The counts come from several directions. University of Minnesota Extension cites a 2012 Census Bureau estimate that about 67 percent of small business owners were born before 1967, which it rounds to two of every three businesses in the country.⁷ The 2011 New York Times column reported an estimate of 9 million of America’s 15 million business owners born in or before 1964, or one owner turning 65 every 57 seconds.² Harvard Business School relays a nonprofit’s count of 2.9 million businesses with owners over 55, employing 32.1 million workers.⁶

Figure

What the businesses of owners over 55 add up to

United States businesses with owners over 55

2.9 million

workers those companies employ

32.1 million

in annual payroll

$1.3 trillion

in annual revenue

$6.5 trillion

The jobs attached

A Washington Post column in 2017 gave the shift its popular name, the silver tsunami, and its headline figure of 25 million jobs at risk, arguing that a mass exit by boomer owners might be good for the owners and much less good for their employees.¹ The Harvard account adds the ways such a company can end: moved by an outside buyer, broken up, or simply closed.⁶

How many plan to sell

Accounting Today reports Exit Planning Institute data that seven of ten owners aged 50 and over will leave their businesses within a decade, alongside a Small Business Administration estimate that 10 million boomer owned businesses would change hands between 2019 and 2029.⁸ CNBC cites the same institute’s later data, through 2023, in which 58 percent of boomer owners said they planned to sell within five years.⁴

How many actually do

Intention and sale differ. Harvard relays the institute’s finding that only about 20 to 30 percent of businesses that go to market actually sell.⁶ The Wall Street Journal reported in 2015 that the expected flood of small firms for sale had not materialized, because many owners of that generation were holding on longer than expected and found it hard to let go.⁵ Pew’s labor data say the same thing in a different register: 29 percent of boomers aged 65 to 72 were working or looking for work in 2018, a higher rate than either of the two previous generations at the same age.⁹

The years the sales were delayed

Timing explains part of it. A 2015 New York Times report quoted bankers who said owners planning to sell were stopped in their tracks in 2008, 2009 and 2010, put together good years in 2012 through 2014 and then came to market, with listings of small businesses for sale at a six year high and the median sale price up 12 percent from the year before.³

What goes wrong at the sale

The CNBC report lists the preparation owners skip: a professional valuation, which advisers there suggest repeating every one to two years and in any case about two years before a sale; a retirement income calculation on an after tax basis, so the owner knows whether an offer is enough; and delegation, tested by whether the company can run for a month without its owner. Owners who hang on too long, it adds, risk selling under pressure after an accident, an illness or a death, and for less.⁴ The methods behind the first item are covered under how a business is valued, and the exercise of writing the plan under business succession planning.

Figure

What new owners of rural Minnesota businesses reported after buying

• Increased sales volume69
• Increased the customer base68
• Kept or added employees87
• Added employees41

Small towns

The Minnesota study looked at 358 businesses in towns under 7,500 people that changed hands between 2008 and 2012, and heard from 176 of the new owners. Most reported growth after the purchase, and 87 percent had kept or added employees. The buyers were a mix: 45 percent had lived in town all their lives, 12 percent had returned to a hometown to take over, and 33 percent were new to town. In one Minnesota town, 46 percent of the local businesses surveyed had no succession plan at all.⁷

Nebraska farms

The same arithmetic runs through agriculture. Nebraska Public Media reported in 2023 that the average principal operator of a Nebraska farm or ranch was 56.4 years old in the 2017 federal agricultural census, that beginning farmer programs now link young people with older landowners whose children are not returning, and that the number of agricultural education programs in the state’s schools had nearly doubled to 209 in a dozen years.¹⁰ The setting is described under family business in Nebraska.

Who buys

What comes next for the wave is a different kind of buyer. The 2015 New York Times report found the next generation of owners markedly more varied than the one selling: more than 30 percent of buyers aged 30 to 49 in one marketplace study identified as Black, Asian or Hispanic, against 8 percent of those over 65, and more than 20 percent of buyers under 49 were women, against 9 percent of those over 65. Its example was an Ohio castings company bought by a 46 year old engineer who put 13 percent down in cash, with the previous owners financing another 12 percent and a bank loan covering the rest, and who kept the two former owners on to teach him the business.³ For owners without such a buyer, the sale to their own employees described under employee ownership and ESOPs is the route the Harvard researchers press, and the structure of any of these deals turns on tax and legal questions, answered by qualified professionals according to individual circumstances.