Could a silver tsunami sink Madison?

Madison has a lot of baby boomer business owners and leaders nearing retirement. Are they ready for the transition, and have they set up their organization for the next phase?
Feature Silver Tsunami Panel

On average, 10,000 baby boomers reach retirement age every day in the U.S., a trend that is expected to continue into the 2030s. Despite being a college town, Madison is not immune from this silver tsunami.

In Madison, 50.42% of business owners are over the age of 55 and 20.64% of those owners have no documented transition plan, according to research from Ready for Next Cities (RFN Cities), a preparedness and business retention program. That fact alone leaves Madison poorly positioned for the impending flood of retiring baby boomer business owners, based on RFN Cities’ disruption risk assessment.

RFN Cities has developed a proprietary tool to measure a community’s potential business disruption risk tied to baby boomer-owned businesses failing to transition. The RFN Cities Business Disruption Rating (BDR) offers communities a way to measure their potential risk in their community.

The RFN Cities’ BDR evaluates continuity risk at various levels. The BDR rating works like a FICO credit score with zero as the lowest and 850 as the highest. A lower score indicates higher disruption risk. According to the multiple data points used, the United States’ BDR stands at 372.14.

Madison’s BDR score is 405.73 — higher than both the state of Wisconsin (at 366.35) and Milwaukee’s BDR of 333.48.

“Compared to Milwaukee, Madison’s population growth rate is higher, as is economic growth; however, the statewide percentage of businesses founded before 1990 is far higher than the national average,” says Guillermo Mazier, vice president of global innovation for Conway Data Inc. and a senior advisor at RFN Cities. “Wisconsin’s older businesses make up 33.6% of all companies in the state. The national average is 26.14%.”

Almost 20,000 Wisconsin businesses have no transition plan at all, a number that does not include businesses with undocumented plans, according to Kim Powell, director of marketing and communications for RFN Cities. Even if these enterprises without transition plans are relatively small on average, the amount of owner wealth at risk is at least $11 billion. If 70% of these businesses fail to transfer, the estimated number of lost jobs could approach 70,000 over the next three to seven years.

Despite having a BDR above the state and national averages, Madison’s wealth is still at significant risk if the lack of transition planning among older business owners is not addressed head-on, indicates Powell.

“At the end of the day, Madison has roughly 56,000 baby boomer business owners making a transition decision in the next five to 10 years that will affect 113,000 jobs in your city,” says Powell.

Even if you don’t plan on retiring any time soon, business continuity experts advise all businesses and organizations to have a transition plan in place in the event of an unexpected event, such as injury, illness, death, and even divorce. If you’re a business owner or organization leader, you should be asking yourself the five Ws — and one H — to help define what your transition plan should look like.


Why are you selling or leaving your business or organization? Ideally, it’s because you’ve enjoyed a long, fruitful career and now you’re ready to pass the operation along to good hands who can lead the next generation of the company forward. However, that ignores deeper questions that could have a profound impact on the next stage of your life. Are you getting out because you’re no longer interested in working the daily grind, or are you still interested in independent consulting or a new venture altogether? Answering why you’re leaving the business can tell you just as much about whether it’s the right choice and help lay the foundation for whatever comes next.


What’s most important to you in the transition? Do you want to keep the business in the family — and is that something the family wants? Do you want to provide yourself with a nest egg for your golden years, or help fund a new enterprise? Do you want to make sure current employees keep their jobs? Do you want the company to go into a bold, new direction or stay the course you’ve charted all these years?


Once you’ve answered your what questions, you can begin to address your who, as in, who do you want to see leading your firm into the future? If you’re selling the business, do you have adult children or a leadership team in place that’s capable and willing to run the business after you’re gone? Do any of these parties have the financial means to purchase it, such that you’re able to ensure your own retirement? Perhaps you have willing parties in house but they’re not yet in a position to take on ownership of the company. This is why planning early for a transition is better, so everyone can prepare for a smooth change in leadership when the time is right.

If you’re looking to sell to outside parties, does their vision and goals align with your own? Will they “take care” of your people, or will they offer you a nice golden parachute only to gut the company months later and leave everyone else high and dry?

If it’s simply a change in leadership, do you have internal candidates who you’ve been grooming to take over, or will you need to search outside the company for new blood? Either option may be a good one — internal candidates often provide a sense of continuity and security that can help ease a leadership transition, while external candidates can help breathe new life into an organization that takes it to new heights.


When do you want this transition to take place? Do you even have a choice? Saying you want to get out in six months doesn’t leave a lot of wiggle room to get all your ducks in a row. Saying you want to turn over the keys in five years might seem like too much time, but with a business transition plan more time is always better. One reason, and perhaps the biggest reason if your goal is to secure your financial situation in retirement, is that with more time to plan the transition, you can try to time the situation to market indicators and valuation trends to maximize your return. Again, if you need to be out of the business in the next six months, you really don’t have the luxury of waiting for better offers if the ones coming in aren’t meeting your expectations. On the other hand, if you already have a transition plan firmly in place, you can be choosy and take your time fielding offers or lining up candidates to be your successor.

Of course, life doesn’t always follow a plan, which ironically makes having a plan that much more important. If your plan is to sell your business in the next five years, make sure that it’s backstopped with contingencies should something unexpected happen in the meantime. Who will take over in the interim while you recuperate if injured or ill? How will the company’s assets be divided if you go through a divorce? If you should die, who will step in to see things through to the next owner or leader? These questions are all facets of the who question above, but they need to be a part of the when, as well. Your family or leadership team might not want to take over the business permanently, but they may be the people best suited to run things temporarily if you’re no longer able.


Now that you’ve answered the why, what, who, and when, it’s time to address how you’re going to implement this transition. While many business owners and organizational leaders wear many hats, now is not the time to don them all. Putting in place a trusted team of advisors — accountants, lawyers, wealth managers, etc. — is best because they can approach the transition process untethered from the emotions of leaving the company you helped build. Besides, they’re the experts. They’re going to see things you don’t and be able to advise you on the best course of action for each circumstance or eventuality that may come your way. Put the transition plan in writing and make sure all the parties involved are in agreement, and then make sure to revisit the plan periodically to account for changes that naturally occur over time as members of your leadership team come and go, family members enter or exit the picture, or markets change. Just because you did your due diligence by creating a transition plan doesn’t mean you can be complacent and expect it to still be relevant months or years down the line.


This might be the most fun question to answer — or the most frustrating. Where do you want to go next? As important as ensuring a smooth business transition is, don’t fall prey to the trap of neglecting to plan for where you want to be in retirement or your next venture. Maybe you want to spend your days on the golf course, but if you’ve never gotten in more than a few rounds every summer, that novelty could soon wear off once you realize there’s a reason you never golfed more often. Perhaps you want to travel, but your significant other still has another five years until they’re ready or able to retire. What will you do in the meantime?

Make sure you put as much care and attention into where you want to be for the next stage of your life as you did into how you got there.

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