The Importance of Exit Planning
Posted by Carl Doerksen on Tue, Dec 15, 2009 @ 11:06 AM
A wise man once said that if you don't know where you are going, any road will lead you there. Unfortunately too many owners of middle-market businesses have not developed an exit plan for their businesses. This means that for many, the only road that will be traveled could be a difficult and financially painful one for their family members and heirs.
This issue becomes especially critical as you near retirement. And, like millions of other baby boomer entrepreneurs, developing an exit plan is vital. Quite frankly there is tidal wave of baby boomer business owners nearing retirement. One of the most entrepreneurial generations in America's history, they have created more than 5 million businesses with revenues ranging from $1 million to $75 million over the past 40 years.
About half of these owners plan to sell or close their businesses by 2016, according to recent research. However, based on most surveys, the vast majority of baby boomer business owners do not have an exit plan in place. According to a PriceWaterhouseCoopers study, about two-thirds of private business owners have no exit plan in place, and an additional 25 percent have done little or no estate planning. Those who will be selling and getting the best deal possible for their companies are the ones who have developed an exit strategy and do estate planning. This helps owners position themselves and their businesses so they can accomplish personal, financial and business goals by the time they're ready to sell the business.
The March Group holds free informational workshops around the country on this very topic. We encounter literally hundreds of middle-market business owners every year that are part of the two-thirds found in the PWC study: i.e., owners that have no exit plan in place. Quite frankly, this is a disaster of tragic proportions. Too many baby boomer business owners are waiting too long to decide what to do with their business. Many are hoping that a son or daughter or another relative will eventually step in and run the business. Others expect an employee to one day purchase the company. Others are waiting simply because they know that these are not options at all.
We would strongly encourage you, if you have not developed an exit plan yet, that you begin to do so today. Do not wait and force your loved ones to dispose of your company in a fire sale. Contact an M&A advisory firm and begin the process today. Realize that it takes 12-18 months to successfully sell a company like yours. If you wait too long to develop an exit plan to sell your company, you may be taking the road that ultimately hurts your family and heirs the most. Having worked with middle-market business owners for over two decades, we know how difficult it can be to do exit planning. But the longer you delay the more chips you potentially will be leaving at the table when your heirs are forced to sell or dispose of your company. Do not delay!