Change is looming.
“People in the exit planning industry are starting to look at an impending trend like a hurricane that they know is coming, but that they haven’t yet felt or seen,” said Jan Graybill, managing partner of Legacy Planning Partners in South Whitehall Township.
He is describing the impact from the expected mass exodus of baby boomers – 76 million in the U.S. – from business ownership the next 10 years.
Their retirements will have a large impact on business ownership across the nation, he said. And that means planning and coordination are needed to prepare for the wave of retirements.
Unfortunately, exit experts say, boomers are not planning well, if at all, for retirement. Instead, many involuntarily leave their business or, when they try to sell it, are ill-prepared and the business does not sell for its value or perhaps goes unsold.
At risk in any of these scenarios are the owners’ retirement funding and the closing or failure of what may have been a healthy, thriving business and its inherent jobs.
According to a study by PNC Wealth Management and the Exit Planning Institute national advisory board:
Closer on the horizon, it estimated that as many as 30 percent of businesses could be changing hands in the next five years.
That’s staggering, Graybill said.
DOING IT RIGHT
Among those looking to retire are the owners of the Apollo Grill, one of Bethlehem’s most popular restaurants. Rod and Dyanne Holt and Patty and Tucker Lyons are boomers who picked this year to retire.
“The restaurant business is a tough business both physically and emotionally,” said Dyanne Holt. “We decided at the beginning of the year that my husband was turning 65 and it was time.”
They set the process in motion for their retirement a few years ago and worked with lawyers and accountants to prep their business for sale before putting it on the market this year.
Ultimately, the process went smoothly and their general manager, Rachel Griffith-Fox, bought the restaurant with a promise to retain the menu, atmosphere and staff – capitalizing on the value the partners had built up the last 19 years.
The sale is expected to be completed next month.
TRILLIONS AT STAKE
Most exit planners probably would compliment the Apollo Grill owners on their planning, but, Graybill said, too many business owners don’t leave their life’s work in such a positive way.
As some baby boomer owners leave their business voluntarily through sale or by bestowing it to the next generation, too many others leave it involuntarily because of illness, death or incapacity.
There is a huge capacity for loss there, Graybill said.
Businesses valued at about $3 trillion are expected to change hands in the near future, Graybill said. Without proper planning, many owners could lose by not getting proper value for their business.
“Too many businesses don’t think about exiting because they’re too busy surviving,” he said.
CHAPTER OF THE EXIT PLANNING INSTITUTE
That dilemma is one of the main impetuses behind the organization of Pennsylvania’s first chapter of a national organization, the Exit Planning Institute.
The Lehigh Valley Chapter of the Exit Planning Institute will have its first meeting Nov. 10 at Lehigh County Country Club in Lower Macungie Township.
Its goal is to get the different players involved in the exit planning and sale of a business through retirement. To ensure they understand what is needed and how to work together to best serve their clients and make sure they’re getting the maximum value in the sale of their business.
Those players, in addition to exit planners such as Graybill, include business brokers, attorneys, accountants and other business service providers who contribute to the valuation of a company.
COORDINATION IS CRUCIAL
Barry Miller, who runs Lehigh Valley Business Brokers in Orefield with his wife, Connie, is seeing the baby boomer business-owner retirement trend.
“We have seen this pick up a little bit. There’s definitely more activity,” Barry Miller said. “It’s becoming well over half … of our overall business.”
Graybill said the coordination of professionals serving business owners is key, because their services complement each other.
Miller agreed. He said that while he has expertise in helping to put a business up for sale and marketing it to the right customers, he often recommends clients work with an exit planner first, because it can take a few years to get a business ready for sale in order to get the best value for it.
Graybill said professionals such as himself help a business owner plan his or her strategy to build the value and attractiveness of a business in preparation for that ultimate sale.
It’s a tricky job.
“Every business is different,” said Dave Wimmer of Murphy McCormack Capital Advisors in Lewisburg, which services Berks, Lancaster and surrounding counties.
As a member of the Lehigh Valley EPI steering committee, Wimmer said it’s important to learn simple processes and techniques that can be used across different industries and business types.
ESTABLISHING BEST PRACTICES
At the inaugural meeting of the Lehigh Valley Chapter of the Exit Planning Institute, members will look to clarify and simplify the process and establish best practices so they know their role and the best ways to help clients.
Chris Snider, CEO and owner of the Ohio-based national Exit Planning Institute, will be the keynote speaker. Snider wrote a book this year called “Walking to Destiny” that Graybill said is becoming a must-have guide for exit planners and business owners.
The Lehigh Valley chapter will meet quarterly in 2018 and discuss such topics as attractiveness versus readiness of a business for sale and the importance of maximizing the value of a business.
EXIT PLANNING INSTITUTE – LEHIGH VALLEY CHAPTER