The recent stock market corrections caused me to think about what’s coming for private business owners, especially those who are part of the baby boomer generation. Public businesses and private businesses do not fluctuate in value synchronously. Investors in public businesses try to anticipate the future and the value of the business will change quickly. Private businesses are affected more by the current economy, which means there is a lag until the economy impacts the business during an actual recession.
I’m not an economic forecaster but researching the history of recent recessions, since 1960 based on NBER data, we have had eight recessions with the longest period between them ten years from March 1991 until March 2001. The most recent Great Recession ended officially in October 2009.
We have now had nine years since the last recession. My point is this strong economy will not last forever.
Business owners who are over sixty years old my want to think about the timing of their exit and not wait until we are in a recession. The value of private businesses took at least five years to recover after the Great Recession. It takes a year or more to sell a business to a third party. If the business owner wants to obtain maximum value it takes a few years to prepare the business for exit. Think about the sequence – three years to prepare, one year to sell. If a recession occurs in the next two or three years it can be five to ten before a business owner can retire, while trying to maintain value during a recession.
Don’t wait to prepare the business for exit. Preparing is an insurance policy for your business protecting your wealth. Seek an advisor to help.
Topics: exit, pre-sale strategies, acquisition, exit planning