That bulge is just starting to make itself felt as the first of the millions of baby boomer owner/managers now start into their 60s and begin looking at transitioning out of their business. In the next few years this bulge is expected to become a tidal wave.

In short, the forecast is that there will be a glut of businesses for sale and, following the law of supply and demand, downward price pressure for most privately owned companies as the increasing number of businesses in play chase a declining number of potential buyers. The price of businesses could fall precipitously as more and more business owners try to sell into this buyer’s market.

Just what this means in terms of numbers has been estimated (for the US) in an NFO survey in 2002. Among the affluent established business owners category for example (48% of the estimated total 9.5 million owners are considered affluent), the number planning to retire was expected to show a sevenfold increase from 50,000 per year in 2001 to 350,000 in 2005 and to rise as high as 750,000 by 2009.

While the initial years of the wave (2004-2009) may see an increase in buyers as younger baby boomers and later generations seek to transition out of corporate jobs and buy their independence, starting in 2010 as the overall population of baby boomers ages, they will move to overwhelming ‘sell’ mode.

The glut may well be exacerbated by an increase in the number of businesses that would normally transition within the family being forced to go to open market sale. Fully a third of family enterprises expect to pass on the business within the family but this strategy may not be feasible for a number of reasons. Apart from lack of expertise, funding or not meeting other requirements to run the family business, surveys are suggesting that fewer young people want to take on family businesses.

When a family sale or internal sale fails the seller must seek a buyer in the open market where they are likely to discover that it is worth far less than they had hoped for. All of the warts and moles of a company are only too apparent to a professional buyer applying a due diligence check.

As birth rates decline and people live longer and retire earlier, the pressures of an aging population are shared by many countries worldwide. There are implications for business owners here also.

With an aging population a huge chunk of the baby boomer workforce will be planning to retire soon and businesses stand to lose a significant proportion of their trained personnel.

The skill set of a business’ employees constitutes a major factor in determining business value. Many companies make the mistake of only planning the financial transactional side of transition, missing the people part of the puzzle. But business value is leveraged off skilled people and smooth running operations – just the factors that may be disappearing rapidly in the near future.

With respect to the successful transfer of businesses, the economy as whole is a major stakeholder. Given the current demographics of business owners, a high failure rate to sell - leading to business closure - will exert great impact on employment, economic output, and business formation in the future, particularly in rural areas where the loss of viable firms may reduce available employment or availability of services.

Successful business succession for retiring owners has become a major public policy issue especially in Europe, North America and Australia where programs have been set up to assist owners to sell their businesses to either their employees or, in the case of vital community assets in rural towns, to local community groups. The leveraged ESOP structure is popular as a structure to implement a gradual buyout of a retiring business owner by the employees. This process could maximize benefits to both the owner and the employees through deferring a 100% sale for a staged employee share ownership plan buyout (or buyin) process.

The vast majority of owner/managers have not developed an effective plan for transitioning out - many are reluctant to even acknowledge the need. Or the fact that less than half of business owners carry adequate benefit funds and are relying on the sale of their business to support their retirement.

This is a recipe for disaster in the era of the baby boomer transition. Anyone who is serious about exiting needs to be well prepared in order to compete for the most desirable acquirers, or to preserve the family business for future generations. For those business owners who intend to sell to a third party, it will become exceedingly important that they position their business to transition successfully in an increasingly competitive market.

With an impending glut of businesses developing on the market, every owner must focus on developing a transition plan that increases the attractiveness, value, and saleability of their business.