Five years ago, almost on a whim, my spouse and I decided to leave Chicago and move to Charlotte, North Carolina. Our three children were still young enough that such a move would not be too disruptive and in fact the transition went very smoothly. We made our decision in May and school started in August so we had just over three months to put our Chicago house (see photo) on the market, find and move into a new home in Charlotte and move all of our belongings South.
When purchasing a house I learned that the most important criteria was: location, location, location. With that in mind, we purchased a great house in a northern suburb of Chicago back in 1997. Lake Forest was a fabulous neighborhood with lots of old trees and ravines. Our house was only a 10-minute walk from Lake Michigan and about the same distance to our town square. Many business people would catch the express train in Lake Forest and be in the city in 45 minutes.
Although the market was soft in 2011, I felt that our house would move quickly and fetch a good price. The house, built by a well-known architect in 1954, was a red brick Georgian on just over an acre. We worked hard to de-clutter the house and stage it for showing.
When we finally got the house on the market in mid-June, there was a lot of buzz resulting in many showings. But, we didn’t receive any offers, not even low ball offers. What was the problem? We knew we had a great house in a fantastic location and it was priced to sell, but nothing happened.
Our real estate agent suggested the typical next move: lower the price. We agreed to move the price down if this would bring us to a quick sale. But, again, lot’s lo lookers but no offers.
As we read through the feedback that we had received from the different real estate agents, the issue was clear: the house was “dated”. While we did a good job at maintaining the house, we got used to it over the years and never saw the need of investing in it. We painted the kitchen and switched out some of the appliances, we replaced the windows and put on a new roof. But that was about it. It was still an old kitchen and buyers in 2011 were looking at “open concept” kitchens. Our bathrooms were still from the 1950s and not very appealing to the eye.
After a year of frustration we finally bit the bullet, pulled the house off of the market and started the renovation process. Two months later the house was back on the market and ready to sell. The question that stuck in my mind was: why hadn’t I done these things while I was living in the house? Not only would the family have enjoyed all the new updates, but I would have spread my costs over many years and been in a much better position to sell my asset according to my own timing.
For most people their house is their most valuable asset. This asset will only appreciate in value if the owner continues to invest in it. For other people, their business is the single most valuable asset that they own.
According to the US Census Bureau there are presently 75 million Baby Boomers in America. Daily, 10,000 Boomers reach the age of 65. Many of them are thinking of retiring. And many of these Boomers are business owners that want to cash in on the businesses that they have built over the past 20-30 years.
In a report from The Mead Consulting Group it is estimated that there are 9.5 million small-to-mid-size private businesses with annual revenue between $1 million to $75 million. Typically these firms have 2 to 500 full-time employees. 65% to 75% of these businesses will go up for sale in the next 5-10 years but only about 25% will find a buyer. Are we about to see a baby boomer business transition bubble? Worrisome is that there aren’t enough young entrepreneurs willing to make the sacrifices necessary to run a business; others can’t come up with the cash required to buy the business.
So, if you are looking to sell your business in the coming years, know this: it will be a buyers market and these buyers are looking for a deal.
It took 2.5 years to sell out house in Chicago. I was relieved when the sale finally closed, but I did have a bitter taste in my mouth. I took the sale personal and felt that the new buyer had taken advantage of us. It was difficult to separate the emotions from the market.
Many business owners will also have a reality check when they decide to sell their pearl. In most cases no one will be interested in it and if they are, they aren’t willing to pay anything near what the owner believes it is worth.
Business owners need to “update” their companies continuously in order to be in a strong position when they do plan to sell. How can they do this? It starts with a 15-minute on-line questionnaire. There is no cost and you will receive your Value Builder Score and a brief description of your strengths and weaknesses. If you would like to dive deeper into the data, we would have a 2-hour consultation and go through the details of a 20-page report. The final step that companies can take if they really want to drive up their value is to start on the 12-month Value Builder Program.
If you would like to know more aboutThe Value Builder System™ give me a call at 704-380-0405 or e-mail: Burt@Lohoff-Gaida.com
Oliver Lazenby: “Way of Retiring baby boomers put their businesses on the market”, The Bellingham Business Journal, Sept. 28, 2015: http://www.theheraldbusinessjournal.com/article/20150928/BIZ/150929951
US Census Bureau, June 25, 2015: “Millennials Outnumber Baby Boomers and Are Far more Diverse”, https://www.census.gov/newsroom/press-releases/2015/cb15-113.html
Stacy Cowley: Baby Boomers Ready to Sell Businesses to the Next Generation, NY Times, Aug. 19, 2015 http://www.nytimes.com/2015/08/20/business/smallbusiness/baby-boomers-ready-to-sell-businesses-to-the-next-generation.html?_r=0
The Mead Consulting Group: “Issues For Growth”, http://www.meadconsultinggroup.com/showNews2.php?id=58