There have been not a few surveys of small business owners conducted that revealed a majority of the owners polled believed they needed a strategic plan for their eventual exit. Over 75% indicated they wanted to sell in the next 10 years, 90+% knew they needed a plan, while only about 20% had a written plan for what is inevitable…their eventual exit from their business.
So, why the procrastination? Well, we’ve observed the following reasons for putting it off, or not planning at all. And frankly, the reasons are understandable.
The owner’s current advisors may not be raising the issue. So an owner understandably questions how important it is to plan, or as a result, they don’t know who to talk to.
There are common misperceptions about an owner’s business and exit including:
Their business being attractive and worth more than it is, and easily sold.
The assumption is that sale proceeds will be enough for what’s next after the business. Often not adequately taking into consideration tax ramifications.
Business cash flow will be sufficient for supporting any future sale transaction.
The successor (s) are ready and willing to take over the business and that it will be a simple process to make that happen.
How long it would actually take to design and execute a plan for a successful exit.
Uncertainty or fear:
Exposing and facing reality about the value and transferability of the business.
A needed change in the role of the owner. Delegating to others.
Life after the business. What will I do next? The business is a big part of my personal identity.
Fear of not being able to find a willing buyer or successor.
Fear of making a bad exit decision.
The time and financial investment required to design and create a plan.
I need to focus on building and growing the business today! (NOTE: this is actually a core focus in a successful exit plan.)
So, in that there are many understandable reasons, including these and others, not to plan or to put it off, an owner needs to decide if the benefits and return on the investments of time and money would outweigh their reasons for procrastination. They need to think through what would be at stake in their particular situation.
Such as:
Life after the business…
Financial security? Time with the family? Travel? Personal goals? Health and wellness? Launch a new business/enterprise? Social impact? Other?
As the owner exits…
Maximizing value and minimizing taxes? Leaving on your own terms? A tangible expression of care and gratitude for employees? Family harmony? Social impact? Other?
Life in the business…
Freedom and control? Income and/or building wealth? Influence? Social impact? Other?
If you conclude that you will plan, but not right now, then be aware also of the age old problem of “not knowing what you don’t know” as it pertains to the time it takes to design and implement a plan that will successfully and comprehensively accomplish your goals. The following quote by John Brown in his book EXIT PLANNING: THE DEFINITIVE GUIDE supports the exhortation to begin planning now:
“I can almost guarantee that it will take far longer to prepare and implement your successful exit strategy than you expect. Only a few businesses (I calculate 200,000 out of 7,000,000) are capable of being transferred today in a manner that achieves the Owner’s goals and objectives.”
If you are uncertain about the need for planning, we will begin with helping you decide if what’s at stake outweighs your reasons for not planning. This is important because it will help you strengthen your conviction one way (plan) or the other (not plan).
Contact us today if we can help you in deciding if planning is right for you.
