BELLINGHAM — Hans Wendt has spent the past two decades doing what he loves — baking at his Great Harvest Bread franchise in Bellingham.
Now, 18 years after he bought the business, Wendt is ready to have more free time to spend with family and to pursue other passions. He put his business on the market in May.
“It could take three or four years to sell, so we’re just starting that process before we’re too old or too burned out to really love what we do anymore,” said Wendt, 59.
He’s isn’t alone in planning his exit strategy.
Every day, 10,000 of his generation — the baby boomers — reach retirement age, according to the Pew Research Center. A wave of baby boomers have begun selling their businesses and analysts expect the number of businesses for sale to reach unprecedented levels.
Nationwide, 65 to 75 percent of businesses will go up for sale in the next five to 10 years, but only 25 percent will successfully sell, according to a report by the Business Enterprise Institute.
“So many businesses will be for sale with only so many younger people with money to buy those businesses,” said Justin Remaklus, a senior manager with Bellingham accounting firm VSH CPAs. “There’s definitely going to be a lot of competition.”
Remaklus is seeing the trend locally. He works with clients on how to sell or otherwise exit their business, called business succession planning. The number of aging boomers coming to him for business succession planning started swelling two years ago, he said. He attributes the timing to the age of the boomer generation, but also to the recession and recovery — most boomers’ businesses gained value in the last three years as the economy improved.
The number of businesses listed for sale on bizbuysell.com, an online marketplace, is at a six-year high, according to the website.
Bob Sytsma, a partner in VSH CPAs, sees the surge as a potential area of growth for his firm, he said. Remaklus is one of five CPAs at the firm who is focusing on succession planning.
“That’s how important we believe this is going to be,” Sytsma said at a seminar on business succession hosted by the Bellingham/Whatcom Chamber of Commerce and Industry in August. “We want to get ahead of the wave.”
Business owners have many options on the succession of their business.
They can liquidate and sell their assets, or sell the company to a competitor, vendor, family member or a key employee. For most businesses, selling is a better deal than liquidating, said Marv Tjoelker, board chair for Larson Gross, a Bellingham accounting firm.
Successfully selling requires starting early, Tjoelker said.
He’s been working with the family who owns Maberry Packing, one of the largest berry businesses in Whatcom County.
Marty Maberry is the third generation owner of the family business and he plans for the family to carry on after him. Two of Maberry’s four kids, in their late 20s, are taking on larger roles at Maberry Packing and plan to one day buy him out, he said.
The Maberrys need to plan now even though Marty Maberry doesn’t plan to retire for another five years, Tjoelker said.
“If you want to retire at X date, you don’t wait until X date to start selling it to your key employee or your children,” Tjoelker said. “This is a process.”
Selling Maberry Packing should give Maberry a comfortable retirement. But his desire to see “life’s work” persist goes beyond his desire to cash out.
“I was given an opportunity by my father and I feel an obligation to give my kids an opportunity as well,” he said. “It’s been a tough business but it’s been a good business and I feel quite a large responsibility to my employees to keep it going. It’s something I would have a hard time seeing just go away.”
If his kids weren’t interested in the business, Maberry would try to sell it to someone with similar values, rather than a developer, he said.
Not all businesses can sell, Tjoelker said. Those with sole proprietors typically don’t have much value to a potential buyer. But planning and creativity can create opportunities.
“Toward the end of their career they could hire someone and start the process of getting them up to speed so that when they retire there’s someone set up to buy it from them,” Tjoelker said. “Any business has succession opportunities.”
By starting early, Maberry can give his kids time to learn the business while he is still there to help. Many aspects of planning for succession have side benefits, Tjoelker said. Maberry said he can take more time away from the business now. And if something happened to him — an injury or medical condition — his kids would be in a better position to take over than if he hadn’t started the transition with them.
Only about 30 percent of family run businesses survive into the second generation, and just 3 percent pull off what Maberry Packing has done and make it to the fourth generation.
Far more businesses are like Hans Wendt’s Great Harvest Bread. His kids aren’t going to take over the business and Wendt doesn’t have a key employee lined up to take over either.
So he’s looking for someone to buy the franchise. To ease the transition for prospective buyers, Wendt will offer to work with the new owner for six months. He has consulted his accountant to determine the value of his business — a step that accountants specializing in business succession say is one of the most important, as business owners often get unsolicited offers for their businesses.
“A lot of clients don’t prepare for succession, they react to unsolicited offers,” Remaklus, from VSH CPAs, said. “They get an offer and they’re not ready to entertain it. Most often they’ll take a discount and end up selling for less than they’re comfortable with.”
Remaklus and other CPAs said that so far, their clients are seeing a lot of interest in their businesses.
Multiple parties are seriously interested in Great Harvest Bread, Wendt said, and many more have shown casual interest.
“But nothing is for sure,” Wendt said. “Now it’s time to order holiday stuff and I’m not sure I’ll own it by the holidays.”
Oliver Lazenby, associate editor of The Bellingham Business Journal, can be reached at 360-647-8805, Ext. 5052, or olazenby@bbjtoday.com.
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
