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.

Dr Craig West

Founder & Chairman | Succession Plus

Dr Craig West is a strategic accountant who has over 20 years of experience advising business owners.

With a background as an accountant in practice and two master’s degrees, Craig formed a strong view that the majority of business owners (and often their advisers) were unprepared and unaware of the steps required to prepare for exit. He then designed and documented a unique 21-Step Business Succession and Exit Planning process to assist owners and their advisers in navigating this process.

Craig now acts as a strategic business and financial mentor for mid-market business owners. Craig has written four critically acclaimed books educating business owners on employee incentives, succession planning, asset protection, and exit strategies. Additionally, he has completed doctoral research on Employee Share Ownership Plans (ESOPs) for succession.

Craig is a Member of the Forbes Business Council where he leverages his extensive experience to contribute valuable insights on helping business leaders navigate the complexities of growing and exiting their businesses.

In April 2024, the Exit Planning Institute admitted Craig to the International Exit Planning Circle of Excellence.