'The Economy Stole My Retirement'

By SARAH E. NEEDLEMAN And EMILY MALTBY

Danny Sullivan dreams of gardening and spending time with his grandchildren, but that's just a fantasy. Retirement is out of his reach, at least for the foreseeable future.

The weak economy has been tough for small-business owners across the board, but for millions of entrepreneurs in their 60s and 70s, the consequences have been particularly frustrating. Sarah Needleman has details on The News Hub.

The 62-year-old founder of a small catering company spends his days helping stock bars with beer and ice, wooing potential new clients and juggling the 20 to 30 different events his firm handles daily.

"I am so tired," he says. "I don't know that I'll ever be able to retire."

The weak economy has been tough for small-business owners across the board, with their total revenue inching up by just 3% since 2007 and declining in fields such as construction (-12%), real-estate services (-3%) and retailing (-2%), according to financial-software maker Intuit Inc. But for entrepreneurs in their 60s and 70s, the consequences have been particularly vexing.

Many of them are stuck in "business purgatory," unable to retire and forced to hang on for a recovery that economists say could still be a long way off.

Mr. Sullivan has struggled to sell Arguello Catering Inc., the Redwood City, Calif., business he started 21 years ago, at a price anywhere near the $850,000 or so he figures he needs to stop working. He reckons that about 70% of his nest egg is tied up in the 25-employee company.

Its annual revenue has fallen to roughly $2 million from $3 million before the recession, Mr. Sullivan says. He has tried, without success, to boost the business's value by branching into new markets, expanding hours of operation and adding healthier menu options. He says he got three offers for Arguello this year, but they were far too low.

Nearly half of the 799 small-business owners surveyed in August by The Wall Street Journal and Vistage International, an executive-mentoring organization, expect to retire after age 65, with 38% saying that their planned retirement date is later than they had predicted five years ago. In addition, 56% said most of their retirement nest egg is tied to their business.

Stuck in 'Business Purgatory'

View Slideshow

Jason Henry for The Wall Street

Danny Sullivan has struggled to sell Arguello Catering, the Redwood City, Calif., business he started 21 years ago.

Baby boomers, in many cases, were blindsided by the recession and its effect on their retirement plans, says George Vozikis, director of the Institute for Family Business at California State University in Fresno.

"Boomer entrepreneurs grew up believing in the American dream that you could start a business and eventually sell it for a good return or pass it onto your kids," adds Aaron Chatterji, associate professor at Duke University's Fuqua School of Business in Durham, N.C. "Because of the financial crisis and subsequent recession, that is more difficult today."

Judy Lawton, 69, says she would like to sell the small staffing company she started 27 years ago. She figures she needs to sell it for close to $2 million to live comfortably. But her company was hit hard by the job-market slump, and its revenue is down by about 60% from before the recession.

Ms. Lawton says she continues to work 12-hour days, meeting with prospective clients sometimes until late at night. She says she can't afford to expand her business, which is down to 13 employees from 35 a few years ago. She recently sold her office building for $3.1 million to help pay off a $900,000 Small Business Administration-backed loan that she secured to survive the recession.

Ms. Lawton listed her business for sale last year through a broker, but all of the offers she received were "insulting," she says: as little as $250,000, plus installments that would vary depending on performance. So far, she has turned them down.

"You don't work for almost 28 years at [building] a company and give it away," says Ms. Lawton, adding she won't settle for what she considers a low offer, given the strong reputation and client base she has cultivated.

She hasn't taken a vacation in years because she can't afford to travel. "The economy has stolen my retirement," she says.

When the economy is tight, putting money away for retirement is much harder, says Gibb Dyer, professor of entrepreneurship at Brigham Young University's Marriott School of Management in Provo, Utah. At the same time, "it's more difficult to sell your business because it's valued less," he adds.

"The average business coming to market has lower earnings [than] it did in 2007-2008, therefore the prices are lower," says Barry Evans, partner at Acquisition Services Group, a business brokerage in San Diego. "If a business has lost 20% of its earning power in the past few years, it will sell for at least 30% less today."

The median selling price for U.S. small businesses during the first half of this year was $150,000, down 25% from $200,000 in the first half 2008, according to BizBuySell.com, an online small-business marketplace. The firm's findings, reported by business brokers, are based on listings and recent sales in 70 major U.S. markets.

In the first half of the year, 3,332 small businesses exchanged hands down 40% from the first half of 2008, it found.

Andy Birol, a small-business consultant in Pittsburgh, says many of his older clients are at a crossroads: "They either have to sell for far less than they need or deserve to get out, or they have to muster up the energy to recommit themselves to the business," he says. "They're conflicted."

Fourteen years ago, when Dan Cawley, 60, started real-estate brokerage Cawley Chicago Commercial Real Estate Co. in Downers Grove, Ill., he planned to gradually sell shares to his employees so he could retire by 70. But the recession hit just at the wrong time.

Last year, the company started offering property-management and consulting services and business has improved.

"The employees, they were concerned about the financial viability of the company," he says. "I wasn't even sure if we'd survive. This grandiose plan was blowing up."

Today, Mr. Cawley spends his 10-hour workdays training his sales team, meeting with landlords and property owners and running staff meetings. He also travels the country to build relationships in other states.

He has delayed his retirement plan for five years. He hopes to sell his first installment of shares next year.

"Every dime is in the company," he says. "I have no alternative savings, except Social Security. And I certainly can't live on that."

Write to Sarah E. Needleman at sarah.needleman@wsj.com and Emily Maltby atemily.maltby@wsj.com

Listening to Complainers Is Bad for Your Brain

Exposure to nonstop negativity actually impairs brain function. Here's how to defend yourself.

shutterstock images

 

10K
inShare

Do you hate it when people complain? It turns out there's a good reason: Listening to too much complaining is bad for your brain in multiple ways, according to Trevor Blake, a serial entrepreneur and author of Three Simple Steps: A Map to Success in Business and Life. In the book, he describes how neuroscientists have learned to measure brain activity when faced with various stimuli, including a long gripe session.

"The brain works more like a muscle than we thought," Blake says. "So if you're pinned in a corner for too long listening to someone being negative, you're more likely to behave that way as well."

Even worse, being exposed to too much complaining can actually make you dumb. Research shows that exposure to 30 minutes or more of negativity--including viewing such material on TV--actually peels away neurons in the brain's hippocampus. "That's the part of your brain you need for problem solving," he says. "Basically, it turns your brain to mush."

But if you're running a company, don't you need to hear about anything that may have gone wrong? "There's a big difference between bringing your attention to something that's awry and a complaint," Blake says. "Typically, people who are complaining don't want a solution; they just want you to join in the indignity of the whole thing. You can almost hear brains clink when six people get together and start saying, 'Isn't it terrible?' This will damage your brain even if you're just passively listening. And if you try to change their behavior, you'll become the target of the complaint."

So, how do you defend yourself and your brain from all the negativity? Blake recommends the following tactics:

1. Get some distance

"My father was a chain smoker," Blake confides. "I tried to change his habit, but it's not easy to do that." Blake knew secondhand smoke could damage his own lungs as well. "My only recourse was to distance myself."

You should look at complaining the same way, he says. "The approach I've always taken with complaining is to think of it as the same as passive smoking." Your brain will thank you if you get yourself away from the complainer, if you can.

2. Ask the complainer to fix the problem

Sometimes getting distance isn't an option. If you can't easily walk away, a second strategy is to ask the complainer to fix the problem.

3. Shields up!"Try to get the person who's complaining to take responsibility for a solution," Blake says. "I typically respond to a complaint with, 'What are you going to do about it?'" Many complainers walk away huffily at that point, because he hasn't given them what they wanted, Blake reports. But some may actually try to solve the problem.

When you're trapped listening to a complaint, you can use mental techniques to block out the griping and save your neurons. Blake favors one used by the late Spanish golfer Seve Ballesteros during a match against Jack Nicklaus--a match the crowd wanted Ballesteros to lose. "He was having difficulty handling the hostility of the crowd," Blake says. "So he imagined a bell jar that no one could see descending from the sky to protect him."

Major League Baseball pitchers can sometimes be seen mouthing "Shields on!" as they stride to the mound, he says. He adds that his own imaginary defense is "more like a Harry Potter invisibility cloak."

A related strategy is to mentally retreat to your imagined favorite spot, someplace you'd go if you could wave a magic wand. "For me, it was a ribbon of beautiful white sugary sand that extended out in a horseshoe shape from a private island," Blake says. "I would take myself to my private retreat while people were ranting and raving. I could smile at them and nod in all the right places and meanwhile take myself for a walk on my private beach."

Blake first saw the picture of the island in a magazine, and the image stuck with him. Eventually, he got a chance to try it for real. "It turned out the island was for rent, and it was the same one I'd seen," he says. "So I rented it for a week. And I got to take that walk."