Columbus faces an unprecedented economic shift as baby boomers begin to sell their businesses.

Baby boomers have never done anything in a small way and that will be the case again when they sell their businesses in the coming years. As much as $10 trillion of small business wealth could be transferred over the next 10 years by the same people who once made hula hoops all the rage, blue jeans an everyday fashion choice and dramatic social change a way of life.

As many as half of the estimated 7 million businesses owned by boomers—those born from 1946 to 1964—are expected to go up for sale over the next five years, according to exit planning advisors. Another 28 percent could end up on the block after that. “It seemingly is like nothing this country has ever experienced,” says Josh Curtis, managing director at Footprint Capital, a Columbus-based investment bank.

With the economy strong, boomer business owners can get good prices in what is seen as a sellers' market. The problem is many owners have not taken steps to maximize the value of their companies when it comes time to sell. “I've seen estimates that 75 percent of business owners have no formal plan in place on how to exit their business,” he says.

Owners also need to align a sale with their personal financial situation and goals for the next phase of their lives. “If I'm a 70-year-old owner, I would think it's time to start harvesting that wealth,” says Scott Snider, vice president of the Exit Planning Institute in Cleveland, noting that about 80 percent of the wealth of baby boomer business owners is trapped within their companies.

Curtis says business owners can lay the groundwork for a successful sale by tapping the expertise of advisors such as CPAs, attorneys, investment bankers and exit planning specialists at least a few years ahead of a sale. “They need to ask themselves, ‘What do I really want to accomplish as a seller and what's the best avenue for me?' ” he says.

It could be a sale to a third party such as an industry competitor or a private equity firm. Curtis also sees increasing interest in sales to family members, managers or employees, including purchases by employee stock ownership plans (ESOPs).

On the downside locally, the sale of so many businesses could harm the region economically and from a leadership standpoint. Curtis says it is inevitable that many sales will be to out-of-town buyers, including some who will move the company's Columbus-based legal, banking, accounting and other professional relationships to firms in other cities. Such sales could also result in local job losses and less support for area nonprofits and community programs.

“These baby boom owners are the fabric of our community,” Curtis says. “Without them and their companies, Columbus would not be what it is today.”

That trend—especially sales to out-of-town private equity firms—also concerns Joel Guth, CEO at Gryphon Financial Services in Columbus. “The rise of private equity has changed the impact,” says Guth, whose firm's services include managing the sales of family businesses and succession planning. “Before we didn't have this incredibly large pot of money that was looking to unlock the liquidity in these businesses.”

But he adds that times couldn't be much better for small business owners looking to sell. There is ample capital in the private equity sector, the economy is strong, interest rates remain low and banks have become more aggressive in lending.

Owners are best served, Guth says, if they start planning for a sale three to five years before they want to exit the business. That gives them time to broaden their customer mix—the more diverse, the better the valuation—and work on investment, legal and tax planning.

He also advises clients about the importance of careful consideration to what they will do after they leave behind their businesses. “So much of their identity is attached to their business,” Guth says. “Now they have to reinvent themselves. That's a tough thing to do post-sale.”

Baby boomers Gail and John Kelley, owners of the Two Men and a Truck moving franchise in central Ohio since 1993, are getting ready for the next chapter in their lives. They have been transitioning ownership of the business to two of their managers, Stephanie and Justin Clarey, with the sale to be completed by the end of 2018.

“We always wanted to be able to sell the company to our employees,” says John Kelley. “We approached this very cautiously and are pleased with the outcome.”

He says the sales process involved “working backwards”—that is, determining how much money the couple will need to maintain their lifestyle in retirement and then arriving at a sale price that would provide that income.

During the exit-planning process, the Kelleys have leaned heavily on advice from their long-time accountant, lawyers and bankers. They also have benefitted from programs offered by the Conway Center for Family Business in Columbus.

Gail Kelley's best advice for owners looking to sell is to first talk with their employees: “You need to see if someone is interested in buying your business and if that door is open to them.”

Sellers of privately held businesses should be aware that the determination of the value of their companies can be won or lost on how sale agreements are structured, especially from a tax standpoint, says Kaz Unalan, director of tax and business advisory services at the GBQ Partners accounting firm in Columbus.

He says buyers typically want to purchase a company's assets, such as machinery and equipment, so they can get tax deductions for depreciation of those assets rather than acquiring a company's stock, which lacks those tax advantages.

Another trap for sellers is they tend to overestimate the value of their businesses based on what they hear other companies may have received from a sale. “They don't always understand that their business is unique in terms of its value,” Unalan says. “A lot of times beauty is in the eyes of the beholder.”

Unalan recommends that potential sellers determine their goals and think about how a sale will affect them emotionally as well as financially. Then they should pull together a team of advisors knowledgeable in exit planning to help them assess their options.

Baby boomer Doug Mock of Mock Woodworking Co. in Zanesville says he decided to get serious about transitioning his family-owned business about three years ago. He worked with Footprint Capital and GBQ to establish a value range and find a financial partner for the 40-employee company, which provides specialty woodworking services to commercial, retail and residential customers.

“I was willing to stay involved to assist with the transition,” Mock says, “and that was requested by all of the parties that presented offers.”

He closed a sale in January 2017 to Dix Communications, an Ohio-based media company that has been diversifying its holdings over the past 10 years. Mock has remained involved in the company, focusing on strategic initiatives while moving away from overseeing day-to-day operations.

“I don't have a specific date to retire,” he says, “but I plan to stay involved on some level as long as I can add value to the business.”

Jeff Bell is a freelance writer.