The current economic climate has delayed retirement plans for many Americans, but small business owners are being hit especially hard. The promise of being able to sell their business for enough money with which to retire remains unfulfilled for an increasing number of owners. Average total revenue for small businesses has increased by only 3% since 2007, and has even fallen in such fields as construction and retail.
Since most small business owners have the majority of their money tied up in their business, the value of that business directly determines when its owner can or cannot retire. Sale of a business is the traditional means of “cashing out” at the end of a successful entrepreneurial career, but buyers are making smaller offers as revenues shrink.
The median sale price of small businesses in the US has fallen by 25% since 2008. As a result, more owners are being forced to delay retirement indefinitely, rededicating themselves to their business past the age when they expected to have sold it. As small business consultant Andy Birol puts it, “They either have to sell for far less than they need or deserve to get out, or they have to muster up the energy to recommit themselves to the business.”
62-year-old Danny Sullivan is one such business owner. He founded a catering company 21 years ago, and has determined that he would need to sell it at a price of $850,000 in order to retire. So far, no one is willing to pay anywhere near that price for Sullivan’s company, largely because its revenue has fallen by nearly 33% during the recession. “I am so tired,” says Sullivan, “I don’t know that I’ll ever be able to retire.”
Judy Lawton is also trying to sell her business, a staffing company she started 27 years ago. At age 69, Lawton is still working 12-hour days, trying to keep her company afloat long enough to attract a decent buyout offer. She estimates that she would need to sell for about $2 million to retire comfortably, but has received only “insulting” offers as low as $250,000. “You don’t work for almost 28 years at [building] a company and give it away,” she says.
Danny Sullivan and Judy Lawton are certainly not alone, as 38% of small business owners surveyed by The Wall Street Journal said that their planned retirement date has been delayed.
Source: Needleman, Sarah E. and Emily Maltby. “The Economy Stole my Retirement.” The Wall Street Journal, 8/30/12. http://online.wsj.com/article/SB10000872396390444230504577615861593287688.html