Opportunity in Chaos

briefcase | invest smarter | Issue #115

Beatlemania, I Love Lucy, Bonanza, driving to watch a movie, mailing letters, landlines, looking stuff up in an encyclopedia, smoking on planes, pickleball, and the Sears catalog.

Oh, and Dilbert comics...Too soon?

Either way, we now have the attention of all the Baby Boomers. Let's continue.

There are about 75 million Baby Boomers in the U.S., and they own about 2.3M small businesses that employ 25 million people.

If you look at small business ownership by age distribution, the trend of aging small business owners becomes greyer clearer.

In Canada, the trend is the same with three out of every four business owners planning to exit in the coming decade (75% of which are retirements). These potential exits cover about $2 trillion in real estate and business assets.

But that's Canadian dollars, which we also use to heat our homes and play monopoly.

Generally speaking, the definition of full retirement age is 67. In the U.S., 14% of those self-employed have reached 67, up from 9% in 2012.

We now have the bulk of the economic engine of North America looking to come offline in the coming years. So who will take over those businesses and real estate assets?

Millennials and their younger peer groups. But, the issue is that most Boomer-owned businesses have little to no plan for exit or succession.

This is holding back a tsunami of Boomer exits. Most don't have any exit plans whatsoever, with 58% of small businesses having no plan for succession.

Even worse, according to a survey by the International Business Brokers Association, they estimate that over 80% of all small business owners don't have an exit plan "the year before they put their business on the market."

Couple this with the fact that 45% of Boomers have no retirement savings, and you can start to see the problem.

According to a survey of over 500 investors reported on by Bloomberg, you need somewhere between $3-5 million in retirement savings to retire comfortably. Most business owners are far off from that dream.

In other news, #Freedom95 is now trending.

All of this means Boomers will be seeking liquidity in the coming years. According to a recent report, in total boomers are expected to liquidate more than $14 trillion in small businesses.

But, according to The Federal Reserve Bank of Minneapolis,

Let's be realistic, at some point owners will lose energy, making it even more difficult for them to grow and invest in their businesses.

So What? Where there's a seller, there is a buyer. And savvy real estate entrepreneurs may find opportunity amidst the chaos of this small business retirement wave.

🤯 Say What? California court deliberating on “whether noisy college students are an environmental impact, akin to pollution or habitat loss" before the building of a student housing project — Davis Vanguard

🤯 Totally Unrelated: 20% of California's college and university students reported experiencing homelessness — WaPo

🤯 Again, Totally Unrelated: A housing shortage is forcing one California university to consider putting dorm rooms on a floating barge — SF Chronicle

📈 Prices: Are still going up. Homes increased in value 5.8% YoY in December 2022 — CoreLogic

🖐🏾 Neat: The typical home changes hands every 12 years — Redfin

👎🏼 No Thanks: Mortgage demand drops to a 28-year low — CNBC

👍🏿 Yes Please: But, pending home sales increased 8% in January — Realtor.com

🏘️ Flexible Living: Zumper now offering a flex pass to live across North America in short-term rentals for $300/year — Zumper

...Boomers discover that Bob Dylan's songs were just a bridge troll’s riddle played in reverse.