You’ve probably realized that your age impacts your attitude toward your business and your feelings about transitioning its ownership. But did you know your age can impact the valuation of your business and the ownership transition transaction as well?
For example, one boutique mergers and acquisitions firm refuses to take sell-side assignments from business owners over the age of 70. That may seem unfair, but it is true.
This M&A firm has been a party to transactions that have frequently been called off halfway through by septuagenarians who’ve claimed they wouldn’t know what to do with themselves if their business was sold. Based on its experience, the firm concluded that owners over 70 are too personally and emotionally invested to bring themselves to sell their business.
While it’s always dangerous to generalize (especially based on something as touchy as age), a few age-related patterns worth noting emerged during the research for John Warrillow’s best-selling book Built to Sell: Creating a Business That Can Thrive Without You. Here are some highlights from that research.
Owner’s Age: 25 to 46
Twenty and thirty-something business owners grew up in an age when job security did not exist. They watched as their parents got downsized or packaged off into early retirement which resulted in a somewhat jaded attitude toward the role of a business in society.
Business owners in their twenties and thirties generally see their company as a means to an end, and most expect to sell in 5 to 10 years.
Similar to their employed classmates who change jobs every 3 to 5 years, business owners in this age group often expect to start and/or acquire a few companies in their lifetimes.
Owner’s Age: 47 to 65
Baby boomers came of age in a time when the social contract between a company and an employee was sacrosanct. An employee agreed to be loyal to the company and the company agreed to provide a decent living and a pension for the employee’s golden years.
Many of the business owners in this generation think of their company as more than a profit center. They see their business as part of a community and themselves as community leaders.
For many boomers, the idea of selling their company feels like selling out their employees and their community. That’s why so many chief executive officers in their fifties and sixties are torn – they know they need to sell to fund their retirement, but they agonize over what will happen to their loyal employees.
Owner’s Age: 65+
Older business owners grew up in a time when hobbies were impractical and discouraged. Many men went to work while their wives tended to the kids (today, more than half of businesses are started by women, but these are different times). At the end of the business day, businesses owners ate dinner, watched the news, and went to bed.
With few hobbies and little other than work to define them, business owners in their late sixties, seventies, and eighties feel lost without their business. That’s why so many owners in this age group refuse to sell or experience depression after they sell.
Most Ownership Transitions Cause Dissatisfaction And Regret
As you can see, your birth certificate can be more significant in shaping your ownership transition plan than your industry, nationality, marital status, or educational background.
As a Wealthpreneur, you may believe you’re ready for anything. But recent data indicates that even the most affluent and successful business owners struggle with one common problem: the regret of how they handled transitioning ownership of their company. Studies show that after only one year, 75% of owners say they regret their decision to transition and 95% are dissatisfied with their net proceeds. If these statistics concern you, evaluate your endgame to ensure you exit on your own terms with no regrets.
