Global Survey on Business Succession and Exit Planning
A recent survey by Sellability Score led to some interesting results for small business owners’ future plans for their business (succession planning).
Almost half of business owners over the age of fifty have delayed their retirement plans due to economic conditions. Despite this seventy-five present of business owners surveyed expect to exit their business over the next ten years, with forty per cent of these wishing to exit within the next five years. So what are the exit strategies that are used in succession planning?
Only ten per cent said that they wish to pass the business to future generations. This trend is becoming more and more recurrent with children no longer taking an interest in parent’s business. Successors are hoped to come from either an outside market (61%) or an internal purchaser such as business partner or key employee (10%). Additionally 14.5% plan to work until they physically can’t anymore and 8% expect to simply close their doors when they retire, taking no profit from the business they have built.
Perhaps the most alarming news to come from the survey was that 90% of owners surveyed don’t have a formal exit plan in place. Additionally, only one third of owners indicated that they expect selling their business to be difficult.
With so many businesses likely to hit the market over the coming years and over 60% of them expecting a purchaser from outside their business one would think that selling at the desired price will be tough. Business owners today need to start getting their business ready for sale. This includes systemising processes, building profits and customer lists and most importantly ensuring that the business can run without you. The majority of businesses in the study were service industries, typically these businesses are more difficult to sell as they are more likely to be dependent on the owner’s personal efforts to attract and retain new business.
So start today by asking yourself what your exit strategy is? Are you going to hand to children, sell to an employee or seek an external purchaser? Can your business function without you and if not, what do you need to do to ensure that you have a saleable business come retirement or exit? What are you expecting to sell your business for and is this a reasonable value? If not, what needs to improve to ensure that you sell for what you want?