It’s a common American dream: Start a business, build it up, sell it for a handsome sum and use that money to retire comfortably.
But the economy ruined that plan for many entrepreneurs, who are still working 12-hour days to keep their businesses afloat long after they’ve passed retirement age.
The Wall Street Journal reports the weak economy has been hard for small business owners, whose revenue has increased only 3% since 2007 and even declined in certain industries such as construction (-12%) and real estate services (-3%), according to Intuit Inc.
This has hit business owners in their 60s and 70s who had planned to create a nest egg by selling their businesses hard, forcing them to put their retirements on hold. Some of them have tried to sell, only to receive “insulting” offers that are inadequate for retirement.
Danny Sullivan, a 62-year-old catering company owner, needs $850,000 to retire but can’t find a buyer for anywhere near that price, especially since his revenue dropped from $3 million to $2 million. ”I am so tired,” he told the Journal. “I don’t know that I’ll ever be able to retire.”
Judy Lawton, the 69-year-old owner of a staffing company, is aiming to pull in $2 million for her company, but has gotten offers for as low as $250,000. Her revenue is down 60%, she hasn’t been able to afford a vacation in years and works 12-hour days to keep it going on a shrinking staff. ”The economy has stolen my retirement,” she says.
More than half of the small-business owners surveyed by the executive-mentoring organization Vistage International and The Wall Street Journal said their retirement plans are tied to their businesses. Nearly half plan to retire after age 65 and 38% say they plan to retire later than they had predicted five years ago.
That’s bad news, since the median selling price for U.S. small businesses went from $200,000 in 2008 to $150,000 during the first half of this year, a drop of 25%. That’s a 25% shorter retirement, or 25% less to spend every month when you do retire.
That’s why LearnVest recommends that small business owners have a retirement plan not contingent on selling your business. (If you’re a small business owner, you can learn how with Build Your Business Bootcamp.) Because you never know how the economy will turn or what could happen to your business.