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Last summer I met with the owners of a local business to discuss ways to grow. They had just finished their 15th year of modest but steady growth in sales and income. Some recent successes had given them confidence in their business model, and they were considering investing in a full-time marketing person.
Unfortunately, their customers are mostly small businesses. A few months after our chat, they lost one of their biggest accounts to the recession. They were forced to restructure their business. They cut costs and laid off employees and now they are looking for smaller office space. Even though they are working harder than ever, potential profits have disappeared, and they have been forced to cut their own salaries by almost 25 percent.
Now, I know there are thousands familiar with companies such as Circuit City, LandAmerica and Qimonda who will immediately say, “At least they still have a job.”
And they are thankful to still have jobs. But there is another factor that makes their case even more precarious: These business owners were born between 1946 and 1954. That means you can count them among the 78 million people and 7 million business owners who are part of the baby-boomer generation.
So before we chalk them up among the lucky ones with jobs, let’s look at the impact of recent economic trends on their life. As it turns out, they were looking at ways to expand their company last summer because they were beginning to think about how they would exit the business and convert its value into more liquid assets. This would help make up for the years when money that might have been invested in a bigger 401(k) was reinvested in the business. Some estimates are that the value of businesses average 65 percent to 85 percent of the net worth of their owners.
Now, just like their 401(k)’s, the value of their business has declined substantially. They might not be able to sell it for some time. Not unlike the housing market, there is more inventory and fewer buyers than last summer, and financing is hard, if not impossible, to secure. Fortunately, our business owners do not have to sell. But because of health and other considerations, many boomers might not be able to hold on until the market comes back. For them, the value of a business has not just declined, it has evaporated.
And let’s not forget about that idea of “working harder than ever.” On average, self-employed people work longer hours than employees. Increase that burden by having to do more with fewer people and factor in the age of baby boomers, and the concept of a “long day” takes on new meaning.
But there is some upside to being a boomer business owner. More than 80 percent of people nearing retirement plan to work past the typical retirement age. At least the business owner has a place he or she can continue to work, perhaps while entering “phased retirement,” the new name for working part time. And, unlike employees who have voluntarily or involuntarily left the workforce, the business owner can keep that coveted group health insurance policy.
It’s no secret. Baby boomers can’t text as fast as those under 40. Some don’t know what “twitter” means, and some just get annoyed when one more message from LinkedIn pops up.
But boomers have learned a lot while growing their heads of gray hair. Business owners from this generation have survived 14 percent prime rates, dot-com busts and several financial crises. They have Rolodexes (some even have Outlook contact files) with the names of friends and colleagues in every field. They know how to network. And they have patience.
The boomer business owners have taken their hits in the past few months. They may even face more in the future. But, like President Bartlett on the West Wing, the best of them will soon close that chapter and ask …