The greatest transfer of wealth no one is preparing for
Having gone through one of the greatest asset inflationary cycles ever, a generation of entrepreneurs face their greatest decision yet.
These entrepreneurs haven’t raised their latest Series A in AI or Adtech, they’re not preparing for an IPO and they’re certainly not holidaying in Mykonos decked out in Loro Piana drinking a 2008 vintage of Dom Perignon.
These entrepreneurs are the lifeblood of our economy and their reign is coming to an end. Their businesses aren’t flashy but they employ 61% of the UK population and they’ve been under steady stewardship for decades.
Investment Managers and Private Bankers salivate over their pensions and property. And rightly so. In the UK, over 80% of household wealth is held by the over-45s predominantly in property. But the decision is fairly simple, to either gift or pass down. Beyond the question of handing a lottery ticket to the next generation the formality is simple.
However, determining the future of your business is a complex decision that transcends the concerns of just one generation.
As a nation, we boast a significant percentage of well-educated adults holding degrees; however, we are grappling with productivity challenges. Generation Y pursued diverse educational paths, including philosophy, while Generation Z aspires to careers in content creation as YouTubers, TikTokers, or influencers. Consequently, it's not surprising that we are facing a significant shortage of skilled labor, leaving few alternatives for the succession of legacy SME businesses other than Private Equity firms or competitors.
This issue is compounded for baby boomer business owners:
They often have no direct heir to the business. Children today have grandeurs of corporate or start-up life, they want to live in London and be ‘independent’ and the appeal of legacy and the family business isn’t there.
For years, their business has provided them with a lifestyle. A way to put family costs through a business whilst providing an income to live off.
They’re risk averse. Wanting to spend more time with dribbling grandchildren and reading the next John Grisham novel rather than leading and growing their business.
Outside of Private Equity, there are limited financing options available for the next generation of business owners to acquire UK SME’s. Where will this capital come from that stimulates the generation to generation transition of UK SME’s.
They don’t like outsiders, brokers or blue suit corporates who want to take their retainer and fee for helping sell their business. They know their business better than anyone and often are blinded to outside help and the realities of selling their business. More often than not though, they’re paralysed by inaction. The emotional decision is too much and a sales process is a second job in itself.
So what does a 50-70 year old business owner do?
Typically they go to their local home counties accountant, tax advisor or solicitor with a problem they do not know how to truly solve.
But the question of what to do next grows heavier and heavier as each year passes:
“What do you need to do to ensure you do justice to a business that you are emotionally and financially attached to?”
And the answer is simple:
“Mentally and operationally prepare your business for a sale and life without YOU regardless of whether you want to sell today.”
At Richardson Capital Advisory, we have spent the last 20 years delicately helping entrepreneurs and families on mentally and operationally preparing their business for their next transition.
Having been through the process ourselves numerous times, we understand the hesitancy that family and entrepreneur owned businesses have in taking their next step. We’re not management consultants, we’re not M&A advisors and we’re certainly not stiff blue-suited corporates.
Stay tuned, as we’ll be delving deeper into the transition of baby boomer businesses and look at both the emotional and practical elements of preparing your business for sale.
