A tidal wave of baby boomer retirements is looming above the slowly rippling economy, and it’s a force that is poised to make a big impact on many small South Sound businesses.
“I always ask business owners on the verge of retiring what they will do,” explained Kala Dralle, program development specialist for the City of Tacoma. “What’s their plan? But nobody ever knows. Maybe just one person I talk to in a year does. It’s unusual for an independent retail location to have a strong exit strategy.”
Indeed, the options are limited for small business owners looking to retire: Transition to a family member, sell, or close shop.
Recent local examples of the former include Tacoma’s Chalet Bowl, which opened in 1941 and is now the oldest operating bowling alley in Washington state. Owner Reggie Frederick has been thinking about passing the business on to his son and daughter-in-law, who are business partners. So far, though, he’s planning to keep running the bowling operations, an associate said, and if he ever were to retire he would likely maintain a close relationship with operations at least through management transition.
And in Puyallup, where Watson’s Greenhouse owner Dan Watson started his business in 1974 with U-pick vegetable gardens plus a few houseplants in a 14-square-foot greenhouse, daughter Maidee came on staff during a 10,000-square-foot expansion one decade later. By 1993, the company had more than 50 employees, tens of thousands more square feet of retail and garden spaces, plus other daughter Terri Elliott on staff. Now that Dan has retired, the Watson daughters, too, are perusing the same situation.
At South Puget Sound Community College’s Small Business Development Center in Lacey, director Ron Nielsen concurred that there is indeed a trend for small business owners to hold on to their businesses longer, and to hold off from retiring.
And Thurston County Economic Development Council Business Resource Center manager Darryl Murrow added that, in the region, there’s been an influx of “business exit-planning” needs, as well as a growth in those who are becoming certified to counsel small business owners regarding the process.
“There are several places available to get certified, usually through groups of attorneys, because I think they realized that the majority of those types of issues were being handled by an attorney anyway,” he said. “Now, the issue seems to come up so much that there’s an actual exit-planning designation that you can obtain.”
Curtis Costner, a principal at Tacoma’s Sands Costner marketing agency, agreed that the Boomer retirement wave is ready to hit in the next three to five years in the region. Of his own clientele alone, he predicts that around half will transition ownership in some form in the next decade.
“This is a topic that I’ve thought a lot about, because when it comes time to retire, a lot of business owners in that generation have extended the date due to financial constraints or (hesitancy about) letting their investments go,” Costner said. “Or, some have to close shop at that point because there’s just no value of their enterprise operation. It supports their own paycheck, but not viable as a continuing business.”
He also agrees with Dralle’s assessment of small business owner retirement planning.
“From my experience, most business owners think they should have an exit plan, but they don’t,” he said.
One local business owner who took the third route of closing, though, did.
That was Judi Quilci, owner of Giardini’s retail store, who spent a decade in the Stadium District of Tacoma before moving to the Proctor District for 28 more years. Due to competition from larger stores with similar but lower-priced merchandise, Quilci decided to shut Giardini’s doors earlier this year. However, so as not to leave the neighborhood with visibly dead retail spot, she first ensured that her site had a viable new tenant.
“The district knew the space would need to be filled, and luckily it worked out that way,” Quilci said.
That tenant is now Compass Rose, the Olympia store’s second site. Manager Liz McMurtry said that, after searching throughout Tacoma, the space was the right match. And Giardini’s former customer base has only helped the new store’s business.
“Once we found Proctor, it was just a matter of finding a space that fit our needs,” she said. “Now, about three out of eight customers come here to check us out because they used to shop at Giardini’s, and about three out of eight others knew about Giardini’s but never shopped there.”
That Quilci’s plan worked out, though, might seem an anomaly in a region where long-empty business retail and service spaces still sport For Lease signs.
However, for those business owners who do manage to step out via a transition to other family members or shareholders, it’s usually of benefit to other companies in the community.
Costner, for example, said that new business owner transitions don’t worry him, as far as his clientele goes. For one, he said Sands Costner relationships extend from the top level down and across the board; in addition, most companies he works with have more than one owner.
“I don’t think that one retiring shareholder is going to affect business, since the leadership role is usually maintained for a minimum of one year, often in the form of a consultant, to keep consistency,” he said. “They want it to be a smooth transition, to make it appear that things are just business as usual.”
His advice, if you’re a business owner anywhere near retiring: Don’t just have an exit plan. Figure out what you need to be doing to give the business value to someone else with the ability to continue it.
Included in this are areas like having a structure for general operational procedures, as well as for handling triumphs like revenue spikes, and challenges like employee shortages or equipment breakdowns.
“People buy enterprises with potential, where they have an immediate answer for the question, ‘What can we do when we hit the ‘Go’ button?'” Costner said. “Small business owners should be building an operation that can be passed on to someone else because a framework is already there. That’s what gives it value.”
And although Quilci didn’t sell or use a mentor for her departure from business, she had the experience of closing another Tacoma business some years ago, when, out of the blue, an interested party offered her a good deal. In this economy, however, she said that any business would be difficult to sell, so owners really to need to have an exit strategy that’s on a multi-pronged timeline.
“You have to figure out ways of keeping your relationships with your vendors, on keeping your inventory and customer interest in it, and how to advertise to keep sales up while closing down,” she advised. “And that timeline for action really needs to be planned out to run 12 to 18 months in advance of shutting your doors, not in just the final three months of operation.”
To find the best choice of the three business retirement options, though, Dralle recommends working with a professional counselor who has been through the process. Agencies providing such advisement services include the Small Business Administration’s SCORE program, among others.
“The best advisors are those who are retired, or close to it; someone who’s experienced with mentoring businesses and has been through that transition,” she said. “I find their advice to be clear and logical. I also tell people that if they don’t have the right mentor, go back and keep at it. Because when you have the right match, it’s magical.”