In response to a recent article in Finweek, Derek Fox the Group Principal of the Renwick Business Network has the following suggestion:
If you pair an entrepreneur up with an existing business where the owner is wanting to retire, the new entrepreneur will take an already successful business forward in leaps and bounds not only because all the value drivers that make a business successful are in place, but also because technology has changed and the retiring owner will certainly not have taken advantage of new technologies and the new entrepreneur will. By taking over an existing operation, not only will you allow a baby boomer to retire, you will be creating wealth by putting an entrepreneur into a working business and you will save existing jobs. You will also create new jobs faster, as the entrepreneur is building from a strong, established foundation; he will be able to grow faster and employ people far quicker than what a new start-up would. While the franchise industry reports a far greater success rate than individual start-ups, growth is limited by the area the entrepreneur purchases to trade in unless the entrepreneur acquires further outlets from the franchisor. A franchise is no guarantee of success, a business that has existed for a while can reasonably be expected to continue in the same way, particularly if you keep the retiring owner as a mentor, be it by telephone or email.
The “baby boomers” want to retire, this economic pool of people born 1946 to 1964 is said to be 72m people strong worldwide. It has also been reported that 85% of the world’s wealth rests in the hands of this group.
In order to retire they need to sell their businesses; if they can’t sell they will close their doors and more jobs will be lost. They cannot sell because they probably have not kept good accounting records, which financial institutions want if they are to finance an entrepreneur coming in. What is confusing though is that financial institutions will throw money at the franchise industry and support somebody in opening up a brand new business but they don’t want to fund an existing business acquisition, yet the business has banked with them for decades, this because boomers never really saw the need to change banking institutions and remained loyal.
The baby boomers never really bargained on succession planning, and the family they sent to university are in business or professional practice for themselves, they don’t want to come and run dad’s coffee distribution business. We surely cannot allow good businesses employing staff to go to ground. Renwick Business Network sells businesses and we see this happening on a daily basis. ■