70% of Small Businesses Will Change Hands in Next 10 - 15 Years
5 Nov 2019
Sixty percent of small businesses are currently owned by people who were born prior to 1964 (University of Minnesota , 2019). It is estimated that over the next 15 years, 70 percent of privately-owned businesses will be sold or transferred to new owners (Giltner, 2019). This trend will impact everyone, but rural communities need to pay extra attention to the number of business owners planning to retire and help them to create succession plans. “The health of small businesses is critical to rural economies. They not only provide jobs but also important goods and services needed for rural quality of life” (University of Minnesota, 2019).
Todd County Economic Development Corporation (TCDC) is taking a leadership role in helping to prepare business owners, and our community, for the upcoming wave of retirements. This begins by ensuring that current business owners have created a succession plan and understand all aspects of what that means. For example, selling a business requires financial, legal and operational considerations – all things that require careful planning. We recently hosted a series of workshops to help address the factors that go into retiring and transferring ownership of a small business.
The four-part series was held in both Long Prairie and Staples funded through a grant from the Initiative Foundation. We covered general, legal, accounting and financial planning considerations for when a person is buying, selling, retiring or transferring ownership of a business to a family member or partner. The workshops were titled -
- Overview and where to start
- Legal considerations
- Accounting considerations
- Financial planning considerations
For those who missed the workshops, we would be happy to provide information.
Preparing to Sell
Anyone who is planning to retire from owning a small business must first prepare their business for a successful transition. This includes doing a financial health check for the business. It will be easier to sell if the finances are in order, a review has been completed and any unnecessary expenses eliminated. For example, is the business paying for services they no longer need or require?
At this point, businesses may wish to seek outside advice for ways to improve the health and long-term viability of their business. Organizations like Todd County Development Corporation”s Small Business Development Center (SBDC) and partners like Senior Corps of Retired Executives (SCORE) provide free assistance and can be a valuable tool in the planning process.
Planning for long-term operations is also important. Depending on the type of business, it may not be possible to sell to someone who is not trained in that particular field. In that case, it can sometimes be easier to train from within and grow existing staff to the point where they could become a business owner and purchase the company. Even if an outside owner will be purchasing it, having staff who are trained in all aspects of daily operations and management is critical for ensuring the business will sustain after it is sold.
Funding for Business Acquisitions
Preparing the business to sell and training current staff are the preliminary challenges. Once a buyer is identified it then becomes necessary for them to find a way to finance their acquisition. There are several ways to do so, including obtaining SBA or bank financing to pay for building and equipment acquisition, private funders and a repayment agreement between the current sellers and new buyers. This can be a complicated process and TCDC is here to help by answering questions, making connections and helping businesses to come up with financing solutions.
Contact the TCDC for Help
If you or someone you know is looking to buy or sell a business, contact Rick at 320-732-2128 or email@example.com to schedule an appointment to discuss the situation and to obtain valuable tools and resources.
Giltner, E. (2019, October 1). Business and Succession Planning. Retrieved from Small Business Administration: https://www.sba.gov/content/business-succession-planning
University of Minnesota. (2019, October 1). Rural communities get ready — a wave of retirements is coming. Retrieved from University of Minnesota: https://extension.umn.edu/community-development/supporting-rural-business-succession