A survey of business owners by BEI (Business Enterprise Institute) found that:
- 57% of respondents want to exit their business in the next five years
- 79% want to exit in the next ten years
- 75% would exit today if their financial security were assured
- 80% believe that a successful exit will result from planning and the action items they implement
- Only 17% had a written plan for exiting their business. And those who did had crafted mainly technical plans, like setting up a trust or talking with their accountant or lawyer.
So if we agree that a successful exit requires planning and that we would like to exit in the next five years, let’s get started!
The what and how of transition planning have been subjects of other TAC articles on this site. This article focuses on why: why is right now the time to plan your transition?
- Statistically, the chances of selling your business are not good. Companies with fewer than ten employees have a 20% chance of finding a buyer. Not planning makes it even more likely you will be one of the 80% who cannot sell. Even companies with over 100 employees have only a 33% chance of finding a buyer.
- Thoughtful reflection and planning will focus your attention and energy on the right areas. There are so many distractions. It is easy to lose sight of the most important activities that will ensure you have something worth buying.
- Planning reveals gaps – in your employee engagement, technology, marketing, processes, and communications. If you don’t recognize the gaps, you have no hope of fixing them. Most buyers are not looking for a fixer-upper.
- While planning doesn’t guarantee your future, it increases your chances of success.
- A farmer cannot plant crops in the fall and expect to harvest them before winter. Likewise, you can’t do your planning just before you want to sell and expect to get the best ROI. Preparing your business (and more importantly yourself) for transition takes time – at least three to five years.
- There is absolutely no downside to planning now. Yes, it takes an investment of time, but done properly, it pays dividends now and capital gains in the future. Like an RRSP, it is an investment in your retirement.
- Not planning has a huge downside; you could lose it all. The difference between selling a business and closing one is not just the price you get, but also the losses you avoid – employee severance, broken leases, selling assets for pennies on the dollar, plus the emotional trauma.
You’ve known for a long time how important planning is for the success of your business. Plan now for your future transition.