Staying or Going


by David Saint-Onge

According to the AARP Public Policy Institute, the percentage of U.S. workers in the 65-and-older and the 75-and-older age groups who work and who want to work increased drastically in 2011.  In contrast, some $10 trillion in U.S. small businesses are owned by this same group and a significant percentage of these baby-boomers want to retire.  This contradiction of supply and demand is the next major issue facing the American economy.

In a recent USA Today article by Janice Lloyd, They Won’t Quit, the employment participation rate for workers aged 65-and-older was 17.9% (up from 10.8% in 1985) and 7.5% for the 75-and-older age group (up from 4.3% in 1990).  By most accounts, these substantial increases can be directly tied to the recent decline in the U.S. economy.  It would seem reductions in the value of retirement funds due to the stock market collapse in 2008, coupled with the residential housing market bubble and declining home values, is cause for many American seniors to reconsider their golden years.

To put this issue into perspective, it is interesting to note the average retirement age in America is 64 for men and 62 for women, according to an analysis of Census data by the Center for Retirement Research.  Census data also show the number of Americans living to age 90 and beyond has tripled in the past three decades to almost 2 million and is likely to quadruple by 2050.

The U.S. Department of Labor – Bureau of Labor Statistics estimates there are approximately 154.4 million employed individuals in the United States.  Small businesses are the largest employer in the country representing 53% of all U.S. workers, while the 30 million small businesses in the U.S. account for 64% of all net new jobs (jobs created minus jobs lost).  It should be noted that 70% of all jobs created in the last decade were by small business.

But with so much uncertainty about the economy, Americans appear reluctant to quit their jobs in hopes of finding a better one, a new Labor Department report shows.

Each month the Labor Department releases a number called the “quits rate,” which is the total number of voluntary separations by employees, as a percent of all employment. When the economy is good, the rate tends to be higher since workers know they have opportunities elsewhere if they don’t like their current jobs.

As you might imagine, the quits rate fell drastically during the recent recession and even during the early part of the recovery. In December 2007, the month the downturn officially started, the quits rate was 2 percent. By January 2010, it had fallen to about half that, at 1.1 percent.  The rate has risen slightly since then. As of July 2011, it was 1.5 percent, where it’s been for several months. Many economists argue these statistics are well below healthy levels.

The quits rate hasn’t stagnated because employed Americans are happier at their jobs. A recent Gallup survey suggested that, if anything, workers are more dissatisfied with many aspects of their jobs now than they were in August 2008.  People are reluctant to quit because employers aren’t hiring. And unfortunately, part of the reason that employers aren’t hiring is due to the uncertainty of the U.S. economy and the growing number of businesses whose owners are contemplating their own futures.

In a New York Times article by Barbara Taylor, Are Baby Boomers Ready to Exit Their Businesses?, older workers who simply do not or cannot retire appear to be on a collision course with the growing number of disgruntled and burned-out baby-boomer-aged business owners who intend to sell their businesses and enter retirement.

According to Ms. Taylor, as of January 1, 2012, the oldest of America’s baby boom generation started turning 65 at a rate of 10,000 a day — a trend that will last for the next 19 years. As I have reported for a few years now, a significant portion of these baby-boomer-aged business owners want to sell their businesses because they simply do not want to continue fighting for less.

What’s interesting are both groups, senior citizens who want to work and business owners who don’t want to work, find themselves the benefactor of their own poor planning.

While there is no shortage of articles proclaiming that people born from 1946 through 1964 are ill-prepared for retirement, my assessment is that poor planning is prevalent in both groups. For seniors, the automatic-pilot management style of their stock portfolios and the assumption that double digit growth was forever routine has them feeling uncomfortable.  Couple this reality with the potential that Social Security may see major changes due to the impact of the rising national debt, and you can understand the fear of making ends meet.  In similar fashion, many baby-boomer-aged business owners have put off necessary exit planning until the 11th hour to set a plan in-place to sell their businesses and recover the wealth needed to fund their retirement.

By some estimates as many as 75 percent of all business owners are afflicted with the no-exit-plan disease. According to a 2008 study conducted by Atlanta-based White Horse Advisors and Vistage International, 96 percent of baby-boomer-aged business owners agreed that having an exit strategy was important — but 87 percent did not have a written plan.

The problem with poor exit planning is the risks are generally innocuous until it is time to leave; then the reality of the situation is simply too much to overcome.  At issue in the coming years is timing, lack of planning and a glut of supply. With 15 million small businesses across the country owned by boomers, the sheer number of businesses expected to come onto the market is staggering.  Current statistics show 9 million of America’s 15 million business owners were born in or before 1964, resulting in one business owner turning 65 every 57 seconds.  As suggested by Ms. Taylor, there is a potential for a tsunami of businesses for sale in the very near future.

My personal experience here in the Upper Peninsula is that this assessment of retiree-workers and baby-boomer-aged business owners is as much accurate as it is problematic.  While older Yoopers want and need to work, there must be jobs for them in the smaller economies that dot the Upper Peninsula.  In contrast, business owners cannot seem to justify the need for the planning process and run the risk of staying in their businesses too long and watching it fail because of the lack of excitement and initiative of the owner.  In many instances, business owners simply close because of the inability to sell their businesses.  Either way you look at it, it’s a train wreck.  Both groups need each other but both operate from starkly different perspectives.

The solution lies with at the hands of the small business owner.  If this group does not give credit to the planning process and the need to design and implement an exit plan, the opportunity for retiree-aged workers to remain active in the workforce will be lost.  I always encourage all my business clients who find themselves in this quandary to recognize the amount of personal wealth they have tied up in their businesses and the need to plan how best to get this money out while keeping the value of the business sound.

It is a shame when a retiring baby-boomer-aged business owner simply walks away from their business and leaves their legacy, employees and wallets slighted.  There comes a point-in-time when you have to decide, with conviction, whether you are going to stay or go.  Regardless of the decision, with planning, good things happen.

David Saint-Onge is President and Principal Strategist for Black Ink Assets, a business consulting company providing organizational assessment and performance enhancement services, business growth and sustainability implementation strategies, development of social media campaigns to promote and protect corporate reputations, and formation of exit strategies and corporate transition plans. David is also the author of Built To Fail – How Uncertainty is Killing Intuition, Invention and Investment in American Small Business, and The Exit Equation – How to Leave Your Business with Your Money and On Your Terms, which is set to be published in early 2012.

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