Knowing exactly where you are heading with your business is the key to a successful exit strategy. It is tied closely to the “why” behind your vision for the company. Surprisingly, very few small to medium-sized companies have a clear plan in place.
Question: What Best Describes Your Business' Exit Strategy?
The survey results above demonstrate the lack of readiness to transition by many business owners, which explains why most transitions fail. The report also demonstrates the need for massive education of business owners and business advisors with regard to how to successfully transition.
It is important for the reader to note that the survey answers reflect the owner’s perception. Although the owner’s answer may be factual, it is not based on proven fact. The only way this can be accomplished is through the completion of a thorough personal, financial and business assessment.
Regardless of your current status, here is one of the top reasons you should be focused on developing a strategy for the overall health and success of your company.
It is the set of the sails, not the direction of the wind
that determines which way we will go.
~ Jim Rohn
Unlocking Your Wealth
Unlocking this wealth in the business is or should be of paramount importance to all business owners if for no other reason than most owners have 80-90% of their financial assets located in the business itself. Given the significance of this asset in the owner’s wealth portfolio, the ability to monetize this wealth at some point will have a significant impact on the owner’s financial security and lifestyle once they exit the business.
The significance of the business asset transition goes beyond the owner and owner’s family. Failure to provide for the continuity of the business not only affects the owner’s personal wealth for his or her family, but for all other stakeholders who depend on the successful transition of the business. “The business owner is the giver of life” wrote Leon Danco, a legendary expert on family businesses, in his book entitled Beyond Survival, a Guide for Business Owners and Their Families. With roughly 6 million operating privately held companies in the US representing around $30 trillion in sales and $15 trillion in wealth, the continuity of the owner’s business matters not just to his or her family, but to the employees, vendors, customers, charities and the communities where the owner provides jobs and economic and social well-being for the business’ local community.
What happens if the business does not successfully transition? The alternative is that the business shuts down. People lose their jobs. Families suffer. Communities suffer. And in many cases an owner’s life’s work is liquidated for pennies on the dollar.
The significance of this is becoming more urgent as Baby Boomers, who own nearly two-thirds of all privately held businesses, face the inevitable condition of aging. Boomer owned businesses alone represent roughly $20 trillion in sales and $10 trillion of wealth in the US alone. Even though Boomers are holding onto their business longer than previous generations, they must face the reality that preparing for their business transition is now an urgent imperative.
Excerpted from EPI State of Owner Readiness Report, 2017 Greater Nashville © Exit Planning Institute
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