Baby boomers across Long Island who have put years of effort, money and even love into the businesses they own are now confronted with what to do with them as they approach retirement.
The companies have consumed owners' lives, been their primary source of income and often their largest single investment. But now they must somehow be turned into cash to provide for retirement.
Among the options are selling to a family member, a trusted manager or a competitor, or keeping ownership but stepping back from day-to-day responsibilities.
A choice many want to avoid: closing the doors.
Regardless of how owners here and across the country dispose of their businesses, experts said the sheer number of baby boomers facing such a decision means the economy will be affected.
"People are waking up and asking themselves: 'How do I monetize my life . . . Who do I sell my business to?' " said Mitchell Fillet, a former investment banker who teaches at Fordham University's Gabelli School and its Graduate School of Business Administration. "There's going to be all this activity in the next 15 to 20 years where businesses either consolidate, get sold or close."
He predicted the ramifications would go beyond how much money owners receive for retirement.
Employees could be out of work if the new owner decides to move the company, he said. Consumers could see a different level of service, new goods for sale or even a shutdown.
Locally, most baby boomers operate businesses with fewer than 100 employees. These firms accounted for 98 percent of the 95,399 businesses in Nassau and Suffolk counties in 2012, according to the most recent available census data.
On Long Island, as in the rest of the nation, more than half of all privately held companies are owned by boomers, born between 1946 and 1964, according to researchers.
A national survey of 951 business owners, released in November by Pepperdine University's business school in Los Angeles, found 38 percent expect to retire within the next five years, 67 percent within 10 years and 81 percent within 15 years.
Jesse Giordano, a financial adviser and family wealth director for The 360 Group at Morgan Stanley in Great Neck, said the retirement of boomer business owners could exacerbate some local problems, such as the decline of manufacturing, shrunken employment opportunities for young people and a shortage of high-paying jobs.
He also said there is a danger that baby boomers will postpone trying to sell their companies, and so too many will come to market at the same time, leading to reduced sale prices. Some transactions, he warned, would not generate enough income for boomers to maintain their standard of living in retirement.Giordano and others urge boomers to develop a plan for exiting their business and what to do afterward.
"This is your final business decision, and if it's the wrong one, you don't get a do-over," Giordano said. "Those business owners that start planning two to 10 years ahead of a transaction are the ones that get the best outcome."
James Carter, 66, began reviewing his life and company in 2009 -- about two years before he sold Bohemia-based Monarch Metal Fabrication Inc.
He was spurred to do so because he wanted to travel, pursue sculpture projects and spend more time with family, particularly his six grandchildren. He also was alarmed to see other businesses struggle when their owners fell ill or died without a succession plan.
"There's a realization of your own mortality," said Carter, who started Monarch in 1990 after owning gasoline stations and a jewelry repair service. "I wanted to leave at the top of my game."
Monarch primarily produces Z Clips -- metal fasteners used to attach paneling to the walls of conference rooms, executive offices, elevators and other spaces. The company had six employees and sales of more than $3 million in 2011, the year it was purchased by Chris Smith, a private equity investor. Smith has since increased sales and more than doubled the payroll.
"I wanted the business to continue and to keep the jobs here," said Carter, who has great affection for Smith, 37, even displaying photographs in his office of the younger man's family alongside those of the Carter children. "I picked the right man."
Carter hired a business broker to sell Monarch after he said he saw other owners try to do it themselves and lose customers and employees in the process.
Anthony J. Citrolo, managing partner of New York Business Brokerage Inc. in Woodbury, handled the Monarch transaction. He said selling a business can take two to three years. And it requires proof of consistent and positive financial results, a talented workforce, loyal customers and an owner prepared to let go, he said.
Unlike their parents, who lived through the Great Depression and World War II, many baby boomers "are totally unprepared to sell their businesses," Citrolo said. "And their cost of living is much higher, so some will have to work an extra 10 years to have enough to retire."
His business partner, Tony Calvacca, said companies are often shuttered because the owners have made no provision for their disability or death.
Hicksville business owner Ronald Pento, 64, was ready to call it quits in 2012.
He had run his air-conditioning and heating company since 1985. It installed and maintained ventilation systems for commercial customers in Nassau and Queens counties, such as the Queens Library, which has more than 60 locations.
R.P. Cooling Corp. employed seven people, including Pento and his wife, Janet. However, he said, the stress and hours had become "just too much."
He recalled hating to hear the telephone ring because it usually was a call for service. And he was dreading another hot summer on roofs repairing air-conditioning units.
"It's a high-stress job, and I was tired," Pento said.
R.P. Cooling had annual sales of $1.7 million when a similar company from Westchester County purchased its name and customer contracts in June 2013.
The speed of the transaction, about seven months, surprised Pento, who had expected to work for another two years after hiring Woodbury's New York Business Brokerage to find a buyer. "We weren't ready; it was a shock," he said. "But I feel a great weight has been lifted off me."
Pento sold to a stranger only after a trusted employee declined to take the reins. Pento's daughter and future son-in-law had offered to step in but lacked industry experience.
It's a dilemma faced by owners of all ages, experts said.
"Most people want to keep the business in the family, but there aren't always family members up to the task," said Steven M. Adler, a Jericho-based lawyer who specializes in business succession plans.
"Business owners try to pass down ownership to unqualified successors, such as children, and it's almost always a disaster," he said. "Owners need to be open to bringing in experienced managers to run the business."
Retirement isn't on the agenda of some baby boomers, according to Ree S. Wackett, a senior business adviser at the Small Business Development Center at Stony Brook University. Less than 1 percent of those seeking the center's free counseling want to exit their business, she said, while 5 percent want to relinquish some responsibility but remain involved.
"It's like having a child, you never talk about leaving," Wackett said. "However, people do want to step back incrementally."
Beth M. Levine, 58, cannot imagine retiring from Multi Media Promotions, her 10-year-old business in Plainview. She's too busy finding new markets for her customized advertising products, from key chains and coffee mugs to cuff links and awards.
Multi Media has revenue of about $1 million per year and four employees. Its roster of customers includes New York City government and Stony Brook University. (Newsday has a small account.)
Levine called it "a dream" to start and operate her own company. She doesn't anticipate ever not working. However, she said she would like to step back in her early 70s and plans to seek advice from the development center.
"My goal was never to build the business and then let it go," Levine said. "My goal far, far down the road is to get the business to the point where I don't have to be involved 24/7, like I am now."
Disposing of a company when you want to retire is complex and can take several years. Heres advice from experts:
1. Plan for the transition two to 10 years before you want to make it.
2. Know what the business is worth.
3. Document the ownership structure, responsibilities of key managers.
4. Prepare financial statements for the past three years that exclude the owners salary, vehicle and other personal expenses.
5. Consult an accountant, lawyer, financial adviser and business broker.
6. Weigh the risks and benefits of acquiring another company to make yours more attractive to buyers.
7. Identify potential successors such as subordinates and family members, and train them.
8. Know what youre going to do in retirement, how much money you will need.
9. Negotiate contracts before selling to retain key employees and facilities.
10. Keep plans confidential or risk losing employees, customers.
11. Have a succession plan for emergencies such as the owner becoming disabled or dying.
12. Consider handing over responsibility to someone else but retaining some ownership; selling to employees; or recapitalizing with money from private equity investors and banks.
SOURCES: Attorney Steven M. Adler; New York Business Brokerage; The 360 Group at Morgan Stanley; Small Business Development Center at Stony Brook University.
Compiled by James T. Madore