Business Owners’ Wake Up Call

Too many business owners have no clue how to eventually leave (“exit”) the company that is so dominant in their lives today. This is worrisome, since on average 80 to 90% of their net worth is tied up in that company. In other words, they are working for decades on creating something ‘valuable’, but do not know how to harvest that value once it’s time to move on to a new chapter in their lives.

But there’s more to it. See some more statistics in below :

• Average owners have 90% of their net worth tied up in their business
• 3 out of 4 are changing businessownership in next 10 years
• 75% don't have any kind of exit plan
• Only 25% have done any financial planning
• 75% are unhappy when they sell their business
• 80% of companies below $50 million in sales never sell
   

Reading these numbers, it appears that exiting is a road full of obstacles, holes and land mines, leading to no clear destination for so many owners. That can’t be right…..

And it isn’t.

Business owners can avoid most of these depressing numbers by starting deliberate Exit Planning sooner rather than later. The best exit plans are written before a company has even started. So it is never too early to start! In general, the average successful exit planning process can easily take 4 to 10 years.

Why is this process so lengthy? A strong exit planning process not only analyses the business and how to strengthen it with regard to an upcoming exit, but takes into consideration the personal and financial situation of the owner and even his life plan after leaving the business. Aligning these factors takes time and careful calibration, on which I will elaborate in a next article.

For now, I would like to conclude with a sample of questions each business owner should ask himself from time to time, in order to feel out how “exit ready” he or she is (2):

1.    Does your company have an active strategic business plan in place?

2.    Have you recently had a formal business valuation?

3.    Does your business have a significant market share or a protective niche?

4.    Do you have a personal, estate, tax and financial plan?

5.    Do you know exactly how much you will need to exit your business in order to live 'happily ever after'?

Many more questions can be asked, but business owners with more “NO” than “YES” answers to these sample questions should wonder how exit ready they are, and what to do about it.

Yeah, time to wake up......

 

Sources:

(1)   Master Planning Institute

(2)   P.G. Christman – The Master Plan