Baby boomer wealth transfer

The transfer of business assets held by the baby boomer generation is a critical issue that needs to be addressed as they begin their retirement years. The valuation of these business assets is an important factor in determining the amount of wealth that will be transferred and the economic implications for both the current owners and potential buyers. 

Business valuations are typically based on historical financials, industry trends, and current market conditions. Factors such as income-producing potential, growth prospects, competitive advantages, access to resources or labour force, and legal and tax ramifications must also be considered. Additionally, elements such as brand awareness or customer loyalty may need to be considered depending on the specific circumstances of each transaction.

The transfer of business assets held by baby boomers is particularly relevant for small and medium-sized enterprises (SMEs). SMEs are the backbone of many countries’ economies, and it is important to ensure that they remain competitive in the market. The baby boomer generation accounts for a large proportion of business owners in this sector, so understanding the valuation of their assets is essential when considering succession planning or retirement strategies.  

Privately owned businesses are an integral part of the global economy. They account for more than half of all private sector gross domestic product (GDP) in many countries and employ millions of people around the world. Research has shown that small- and medium-sized businesses (SMBs) can contribute up to 40 percent of economic growth, as well as create jobs at a much faster rate than larger organizations. Furthermore, SMBs are essential sources of innovation, providing various necessary services and products that larger companies may not be able to offer.

Research into the value of privately owned businesses conducted by the World Bank Group has revealed several important points. Firstly, SMBs have been found to be resilient during times of recession, often recovering more quickly than larger organizations. Secondly, SMBs generate disproportionate amounts of innovation, with smaller firms being more likely to develop new products and processes than large companies. Thirdly, SMBs tend to operate more efficiently and cost-effectively since they have fewer layers of management. Finally, privately owned businesses are important contributors to local economies, creating jobs and boosting economic growth in their communities.

Overall, the evidence suggests that privately owned businesses play a key role in driving economic development around the world. As such, governments and other stakeholders should focus on supporting and sustaining these businesses through legislation, incentives, and other forms of assistance. With the right resources in place, SMBs can continue to be a valuable source of growth for global economies.

In order to maximize the value of baby boomer business assets, it is important for buyers to understand not only the financial aspects but also how these businesses operate on a day-to-day basis. This includes understanding the customer base, management systems and processes, human resources policies, marketing practices, and other operational components that can influence success. Buyers should also consider the potential impact of baby boomer retirement on employees, customers, and suppliers, in order to ensure a smooth transition.

Ultimately, baby boomer business assets can provide an excellent opportunity for SMEs to drive growth and remain competitive within their sector. Understanding the valuation of these assets is essential in ensuring that they are transferred at fair market value and with minimal disruption to existing operations. It is important for baby boomers and buyers alike to understand the complexities involved in business asset transfers in order to ensure that all parties benefit from the transaction.

Feel like you’re ready to have the hard conversation? Talk to our advisors.

Craig West

Executive Chairman | Succession Plus

Craig West is a strategic accountant with over 20 years of experience advising business owners. His background as a CPA in public practice has provided invaluable experience in the key issues of concern to business owners.

In March 2014, Craig was appointed Executive Chairman of the SME Association of Australia, Australia’s largest small business organisation representing over 300,000 business owners.

In October 2014, he was awarded the Exit Planner of the Year at the Exit Planning Institute Annual Conference in Texas, USA, due to his innovative development of an exit planning process to help business owners maximise business value and achieve a successful exit.

Craig’s proprietary structure - a Peak Performance Trust - has won the Australia-wide award for the Employee Share Ownership Plan of the year twice in four years.

In November 2018, Craig launched SME Experts in partnership with Mark Bouris’ Mentored on Podcast One and quickly grew the monthly podcast audience to over 26,500 downloads; in October 2019, he released a new podcast focused on medium-sized businesses - Mid-Market Matters.

In July 2021, Craig joined the NSW Committee for STEP (Society of Trust & Estate Practitioners) – focusing on advising families across generations.

Craig has also launched a SaaS platform, Capitaliz (which captures the 21-step process), to assist other advisers internationally deliver advisory services at scale.

In November 2021, Craig was appointed Executive Chairman of NSW Leaders, a business mentoring group for leading NSW businesses.

In July 2022, Craig West received the award of Doctor of Business Administration for his research thesis titled “Examination of the key factors driving business exit options in Australian Small and Medium Enterprises.”

Craig is passionate about encouraging business owners to think strategically, maximise the value of their business and achieve a successful exit.