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Growing niche: Exit planning for boomers

John Seelmeyer

A couple of demographic trends struck Reno insurance man Stan Goodin a while back:

People who sell businesses are, on average, 56 years old right smack in the Baby Boom generation. And the size of the next generation, the potential buyers of businesses among members of Generation X, is a heck of a lot of smaller than the size of the Baby Boom.

Fired up by those insights, Goodin began to focus on development of exit strategies to help Baby-Boomer business owners and he became part of a small cadre of financial professionals in northern Nevada who’ve identified a similar niche for themselves.

Scott Wait, a certified public accountant with RS Wait Chtd., says the northern Nevada Baby Boomers who are beginning to develop exit strategies for themselves are part of a group of some 7 million Baby Boomers nationwide who own businesses about

9 percent of the Baby Boomer population.

Some, he says, are looking for an outright sale of their businesses. Others want to implement transfer of ownership to family members or employees. And some are physically sick or just sick of the business.

No matter what the goal, they’re learning that a successful transition needs a lot of time and careful planning and that’s the opportunity that financial professionals see for themselves.

Michael Bosma, managing shareholder of the The Bosma Group, a CPA firm in Reno, says a well-developed plan sometimes requires as much as five years and often at least two years to execute.

In that time, business owners need to address big questions “Is my management team ready to take over ownership?” for instance and need to clean up the company’s governance and financial reporting.

A key provision of many exit plans, Goodin says, is retention of key employees and non-compete agreements to keep them from opening up down the street.

Business owners who want to exit through the merger or sale of their company need to be particularly careful about building a team of advisers.

“You better have as good a planning team as the people who are buying you,” says Goodin. “They do this all the time. You’re doing it once.”

Even so, the need for clearly defined exit plans is only beginning to dawn on the Baby Boom generation of owners.

“They’ve thought about it,” Bosma says. “But it’s rare that they’ve done any work on it.”

The psychological makeup of Baby Boomers is a factor in the late arrival of some of them to creation of an exit plan.

“They’re very secure in their own skill sets maybe too much so,” says Bosma.

But as the economy turned south in the past couple of years, more of them got realistic about the value of their business inflated expectations is a common problem and became more willing to take on professional assistance to get a deal done.

On the other hand, Baby Boomers often are more willing than earlier generations to let go of the reins at a company they’ve built, says Katrina Loftin, a vice president in Reno with BTI Mergers & Acquisitions.

“They’re more willing to sell the business,” Loftin says. “They are more willing to see change.”

And, she says, the same Baby Boomers who account for a big chunk of the sellers at the business brokerage often turn around and become buyers a few months later.

“They’re too creative, and they’re too young,” Loftin says. “They don’t know what to do after they sell their business.”

Goodin, who successfully exited the ownership of a chain of five service stations to become a New York Life agent 26 years ago, says a key element in planning is coordination of the many disciplines appraisers, accountants, lawyers, personal financial planners, insurance experts that become involved in exit planning.

“You need someone to quarterback the process,” says Goodin, who positions himself as that quarterback. “I’m getting more interest from business people in this than anything I’ve ever done.”

Others, too, see growth in the niche.

Already, Loftin says, Baby Boomers account for about 90 of the businesses both buyers and sellers at BTI Mergers & Acquisitions.

And Wait says business-continuation strategies, which currently account for about 30 percent of his practice, probably will grow to 50 percent in coming years.