Why Our Retirement Crisis Could Mean Extinction For the Family Business by Toby Scammell
In the U.S., family businesses are as iconic as baseball or apple pie. Business consultants frequently extol the virtues of the family-owned enterprise, but sadly, the future of this American institution is in doubt thanks to a perfect storm of economic and demographic forces.
My company recently polled nearly 3,000 small business owners — primarily mom-and-pop shops with less than 25 employees — in all 50 states to find out how their optimism (or lack thereof) affects various business decisions. 41% of American small business owners plan to sell their companies, by far the highest response. Only 19% said they plan to give the business to one of their children, which was the next-highest response.
In a vacuum, these findings could simply mean that it’s a seller’s market for small businesses, which is generally true. But when you factor in the coming retirement crisis for Baby Boomers, the data take on a different meaning: the sell-off is likely out of necessity.
As has been well-documented, Boomers are retiring at the incredible rate of 10,000 people per day. Problem is, poor planning and unfortunate economic events have left many Boomers wholly unprepared for retirement. This leaves millions of would-be retirees looking around for a nest egg.
Only about 1
in 4
Americans age 50 and 60 are on track with their retirement savings.
While the economy is back on track, the economic woes of the past decade couldn’t have come at a worse time for Boomers who own and operate local businesses. With retirement looming, aging entrepreneurs are faced with diminished savings, uncertainties around health care, taxes, and social security, and the ever-present concern of extracting enough profits from their businesses to earn a decent living. It’s no wonder they are looking for
one last windfall.
If there was more money to spread around, more business owners would be inclined to keep their companies in the family.
When we asked which policy area they most want changed, small business owners overwhelmingly said they want
tax reform.
Small businesses face a constant uphill battle against larger competitors and the struggles of staying ahead of a constantly shifting business environment.
The last thing they need is more burdensome rules. In fact, 1 in 5 respondents to our survey said the federal regulatory environment is their top reason for business pessimism.
The family business is dying, and there’s more at stake here than nostalgia.
Saving this critical piece of Americana will take a concerted effort to ensure our aging entrepreneurs can retire comfortably as a reward for their many contributions. Let’s make it happen.
Toby Scammell, Founder of Womply See the original article here.