I talk to many business owners and I always ask the question, “How and when do you plan to exit this business?” It never ceases to amaze me how many people tell me, “I am never going to leave my business; this is my life.” Let me put that myth to rest immediately. Every business owner WILL leave their business. They may leave it vertically or they may leave it horizontally, but they will leave it.
That being said, it is obvious that exit planning is very critical to business owners, but especially small business owners. Why? Let’s look at some statistics from the Small Business Administration.
There are approximately 23 million businesses in the US. Of these businesses, 99.7% have fewer than 500 employees. In other words, small business!
Over 65% of these businesses are family owned or closely held businesses.
Over 50% of small businesses are owned by individuals over 50 years of age.
What does this say? There will be more businesses hitting the market for sale in the next 10 to 15 years than ever before in history. As the baby boomer generation moves closer and closer to retirement, they will be looking to exit their businesses.
The first, and often, preferred method of exiting a business is by passing it along to the next generation. This method is fraught with challenges, the least of which is the ability of the next generation to manage the business and keep it profitable. Statistics show that 70% of businesses passed on to the next generation fail within the first three years.
Another method of exiting a business is putting it up for sale. If you remember from the paragraph above, there will be lots of businesses for sale in the coming years. What happens to any commodity on the market when there is excess supply and not enough demand? The price will go down. Only the businesses that are the best prepared for transition will realize top market prices. It will be a very competitive market and unprepared businesses (and their owners) will not realize their potential value.
Preparing to exit your business, regardless of the method used, takes preparation, forethought, planning and execution. It is never too early to start the process of exit planning. It is easier to start and to grow your business than it will be to exit your business.
B2B CFO® offers unique Exit Strategy processes and tools that help business owners plan for the eventual exit from their company. This methodology is a planning process that will help you set goals and move toward the eventual day when you no longer own the business. Call me at 203-545-6186 for a free consultation and prepare to receive the full value for your business.