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American Business Brokers & Advisor Founder & President PROFESSIONAL INTERMEDIARY & MARKET MAKER FOR PRIVATELY HELD COMPANIES Author of ‘The Art of Buying and Selling a Convenience Store’ & ‘Selling with Certainty’ Involved in the Sale of 800+ Businesses Advisor • Consultant • Speaker
JUNE 2020
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The Baby Boomer Business Bubble HowWill Your Business Weather the Upcoming Storm?
“Because of the surplus of sellers and shortage of buyers, businesses will sell for far less than they have in previous years.”
To my knowledge, nobody is talking about something I consider to be a looming crisis. I know everyone is tired of hearing about the latest crises (I know I am), but this one has been brewing for a long time, and I want to make sure all of you know about it. There are approximately 77 million baby boomers (people born between 1946 and 1964) in the United States, and I’m one of them. Approximately 10,000 of these baby boomers are retiring daily — and I’m not one of them! A large portion of the baby boomers who are retiring are business owners, and they will eventually exit their business by either passing it on to their family or selling it. There’s nothing wrong with that in and of itself, but here is where the problem arises: As all of these baby boomers begin selling their businesses, there is a good chance there won’t be enough buyers. You heard me right — there are going to be more sellers than buyers at the rate baby boomers are retiring and exiting their businesses. The next generation is not as entrepreneurial as baby boomers. They don’t seem to have the same desire to own and operate their own business like we do. As we all know, business is about supply and demand. If we are in short supply of one kind of business, the demand goes up. If there are too many of one kind of business, the demand for that business goes down. As time goes on, a lot of baby boomers will decide to exit the business, but there won’t be as many buyers. Because of the surplus of sellers and shortage of buyers, businesses will sell for far less than they have in previous years.
To top things off, after the COVID-19 pandemic runs its course, even more business owners are going to want to sell. They will be tired of dealing with all of the chaos the coronavirus brought on. However, because of the uncertainty that the pandemic has brought to the market, even fewer people will be interested in buying or starting businesses. Please understand that I am not trying to be alarmist or pessimistic. I just want to be upfront and honest about what I’ve perceived about the market lately so we can all be informed and approach solutions to this issue pragmatically. The solution is what the Boy Scouts’ slogan has been for years: “Be prepared.” Be prepared by knowing what your business is worth and thinking about the future. Is your family interested in taking over your business? What does the future look like for your business? Does it have a long horizon ahead of it, or could it be the next victim of the likes of Amazon or Netflix? It’s a lot to think about, so start considering your options as soon as you can. For additional insight into these and other questions, go to TerryMonroeBooks.com for your FREE copy of “Selling with Certainty: Straightforward Advice for Cashing In on the Full Value of Your Business.”
–Terry Monroe
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About to Retire?
Consider These Low-Risk, High-Return Investments
As you age, it’s wise to make some changes in order to stay healthy, like your diet or your workout routine. Likewise, your portfolio should be adjusted to reduce risk and protect your financial health. After a bad turn in the market, it can take up to a decade to make your money back. If you want to retire in the next five years, then can you really afford that risk? Reducing your risk doesn’t necessarily mean missing out on high-return investments, though. Here are some low-risk, high-return investments to consider adding to your portfolio as you approach retirement. Peer-to-Peer Lending Otherwise known as P2P lending, this investment takes place online. Borrowers are matched with investors for loans that benefit both parties — lending without the bank. Your risk and potential returns depend entirely on which loans you choose to invest in. The two most popular P2P lending platforms are Lending Club and Prosper, and you can start investing in either platform with as little as $25. Real Estate Investment Trusts When you invest in real estate investment trusts (REIT), you’re investing in mortgages or direct equity positions in various properties. When the
stock market is in decline, REITs are a good investment because they’re not corrected with stock exchanges. Plus, their yield is usually higher than the dividends investors get from stocks. Fixed Indexed Annuities When it comes to low-risk, high-return investments, fixed indexed annuities (FIA) are the most attractive option for retirees. In 2018, renowned economist professor Roger Ibbotson conducted research into the return history of inflation, U.S. Treasury bills, government bonds, FIAs, and stocks. Unsurprisingly, stocks offered the highest returns historically, but Ibbotson was surprised to find FIAs came in second, beating out bonds and conventional wisdom. Historically, these investments have produced great returns for individuals who are in retirement or who are about to retire. However, remember that everyone’s circumstances are different. Before making any changes to your portfolio, talk to your financial planner about your options.
Lessons From the Toilet Paper Shortage
WHAT IT TEACHES US ABOUT CONTROL
If most Americans can agree on one thing, it’s that they never want to visit their local convenience store needing to buy toilet paper, only to find that it’s out of stock. When the COVID-19 pandemic reached the United States, a mass panic ensued in many big-box stores around the country. People bought out entire supplies of toilet paper, leaving behind uncomfortably empty shelves. With the benefit of a bit of hindsight, we can now look back at that phenomenon with a clear head and ask the question: Why did Americans buy entire stores out of toilet paper? Unlike many other products that sold out, it served no direct purpose in combating the coronavirus. As it turns out, the toilet paper shortage was the result of a few key psychological factors. At the base of the panic was a desire to simply stay in control. When we’re not living through a crisis, it’s very easy to feel like we have a good lead on things. However, when natural disasters or pandemics sweep through town, we want to make sure we can take care of ourselves. So, we rush to the store and buy as much as we need to feel in control again. Toilet paper is a product that few of us can picture living without. In order to feel in control, a few people bought way more toilet paper than they needed. Then, our herd mentality kicked in, and all of us started wondering if we were going to need to stock up on toilet paper.
When we reminisce about those empty shelves, it’s worth considering the lessons we can learn from the run on toilet paper. How do you react to situations that appear out of your control? Do you find things that you can control and focus on those? Do you immediately start thinking the worst- case scenario is on its way? Do you ruminate on the problem, or do you buckle down and solve it? Many of you might think you do well reacting to situations that are out of your control. However, it might not hurt to do some introspection and take a lesson from the toilet paper shortage.
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Take a Break!
The Life Expectancy Rule of Thumb AND WHAT IT MEANS FOR HOW WE LIVE
WORD SEARCH
Every industry has its own “rules of thumb.” For example, in the business sale brokering and advising industry, there are rules of thumb for determining a business’s value. However, did you know there is a rule of thumb for determining your own life expectancy? As wild as it may sound, there is a rule of thumb to predict how long you will live. This is far from being an actual scientific formula, as all rules of thumb are, but it’s still interesting to think about. The rule of thumb (or formula) for determining your life expectancy is as follows: Subtract your present age from 100, multiply that number by 2⁄3, then add that amount back to your present age to get your life expectancy. For example, if you are 55 years old today, then:
SUMMER BARBECUE SUNSHINE GEMINI
FATHER’S DAY BEACH HOT PEARL
ROSE SOLSTICE
GRILL PRIDE
100 – 55 = 45 x 2⁄3 = 30 + 55 = 85
SUDOKU (SOLUTION ON PG. 4)
So, if you are 55 years old today, then there is a good chance you could live to be 85 years old. Again, I don’t have any scientific data to confirm this formula — that’s why I’m just calling it a rule of thumb. But what if it is pretty close to being right? I think it could end up being a pretty accurate formula. Our bodies don’t continue at the same rate and energy level throughout our entire lives. As we age, the amount of energy we possess decreases until we suddenly quit working, like batteries in an electronic toy or flashlight. So, if any of this is true, then we may want to adhere to the Boy Scout motto: “Be prepared.” You could embrace that motto in plenty of ways. You could prepare your business (or sell it) before the next big change in the industry. You could spend more time with your family and friends to prepare for a time when you might not get to do that anymore. You could also complete those projects you’ve talked about for years but always put off. You know which projects I’m talking about — everyone has them!
We only have a finite amount of time on this earth. Are you prepared to make the most of it?
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INSIDE P.O. Box 810 Effingham, IL 62401 1 2 Weathering the Baby Boomer Business Bubble Best Investments for Retirees Lessons From the Toilet Paper Shortage
Sudoku Solution
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The Life Expectancy Rule of Thumb Take a Break
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The Secret to Leading in a Crisis
When business coach and scholar Helio Fred Garcia published “The Agony of Decision: Mental Readiness and Leadership in a Crisis” back in 2017, he had no way of knowing that a pandemic would break out just three years later. Now, his book about how to make tough calls under pressure is more relevant than ever for entrepreneurs. “The Agony of Decision” teaches that when your company is on the line, it’s quick thinking — more than smooth communication, effective execution, or even expertise — that can save it. The book offers a framework to guide you through the decision- making process, helping you identify and weigh each outcome, then choose the right one. Answer that first big question, Garcia teaches, and the rest of the tumblers will click into place, allowing you to lead your company forward. To prove it, he weaves his personal experiences and decision-making scaffolding with notable stories of past business failures and successes.
don’ts of crisis response with both current and historical events (remember Exxon Valdez or Tylenol?) that clearly demonstrate the right way to respond … and the gateway to disaster.” With more than 30 years of experience mentoring massive international companies and nurturing business leaders at top American universities under his belt, Garcia is the perfect person to give voice to these tough lessons. His prose is self-assured, knowledgeable, and easy to read, which makes “The Agony of Decision” a surprisingly comforting book for an entrepreneur going through hardship. There’s a reason BookAuthority named it one of their best crisis management books of all time! In the last few months, the coronavirus has proven to be the ultimate test of crisis management. If you’re in the process of figuring out how to lead your business effectively through the turbulence and could use a decision-making toolkit to help you when the phone rings with bad news, “The Agony of Decision” might be your ideal summer read.
Unsure of How to Lead Your Business Through a Crisis?
‘The Agony of Decision’ Has Answers
As one Amazon reviewer writes, “Helio Fred Garcia provides a thorough discussion of the do’s and
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