For many business owners, the day-to-day challenges of running a company often take precedence over long-term planning. Yet, a recent study from the Exit Planning Institute (EPI), the 2023 National State of Owner Readiness Report, sheds light on the crucial need for proactive exit planning.
Whether you are nearing retirement or just starting to think about your future, these findings should urge you to take action now.
Here are top 10 reasons why every business owner should develop an Exit and Value Acceleration Plan today:
73% of Business Owners Plan to Exit Within the Next 10 Years: A staggering 73% of business owners intend to leave their business within the next decade, and nearly half (48%) plan to do so within the next five years. This means time is running out for many owners to ensure their businesses are positioned for a smooth transition. Exit planning is no longer something to postpone—it needs to be addressed today to capitalize on a successful exit and avoid the risk of losing value.
A $14 Trillion Wealth Transfer Opportunity: The wealth transfer over the next decade is valued at an eye-popping $14 trillion. As baby boomers and other owners transition out of their businesses, this wealth transfer represents a massive financial opportunity. Without a well-defined exit plan, however, business owners risk leaving significant value on the table or missing out on a profitable exit entirely.
Younger Owners Are More Prepared: Millennials and Generation X business owners are leading the charge in exit readiness, with more than half having written personal, company, and financial plans in place. This new generation of entrepreneurs views exit strategy as part of the business life cycle, not just a retirement consideration. By being proactive, they are setting themselves up to maximize their returns and move seamlessly into their next ventures.
70% of Owners Now Know Their Exit Options: Thanks to an increasing focus on exit education, 70% of business owners are now aware of their exit options, compared to just 34% a decade ago. While this is a significant improvement, it still leaves 30% of business owners in the dark about how they can exit their business successfully. With more educational resources available than ever before, there are no reason to delay understanding your options.
Written Transition Plans Have Increased by 289%: The importance of putting plans in writing cannot be overstated. Owners with a written transition plan are significantly more likely to see a successful exit. Since 2013, there has been a 289% increase in written transition plans, but many business owners still fail to formalize their goals and strategies. A written plan aligns personal, financial, and business goals, ensuring no steps are missed in the transition process.
Financial Advisors Are the Most Trusted Advisors: In 2023, business owners shifted their trust toward financial advisors, making them the top source for exit planning advice. This shift highlights the growing recognition that comprehensive financial advice is essential for exit planning. Financial advisors can help owners align their business strategy with personal wealth goals, offering valuable guidance throughout the transition process.
Continuous Improvement Increases Business Value: One key takeaway from the report is that continuous improvement strategies lead to a more attractive and valuable business. By focusing on operational efficiency and long-term growth, owners can ensure their business is well-positioned for a lucrative exit. Exit planning is not just about an eventual sale—it is about improving the day-to-day operations of the business to make it more appealing to future buyers.
Education is Critical for Success: A full 85% of business owners who are best-in-class in their exit strategy have sought outside education. Whether through workshops, seminars, or working directly with exit advisors, learning about exit planning is crucial to ensure a smooth transition. Owners who educate themselves and seek expert advice are far more likely to achieve their financial goals upon exit.
Family-Owned Businesses Favor Internal Transitions: For family-owned businesses, internal transitions are becoming the preferred method of exit. In 2023, 82% of second-generation owners favored passing the business to a family member. This trend underscores the need for clear, strategic communication and planning within families to ensure a smooth handover and maintain the business' legacy.
Exit Planning is a Present Imperative, Not a Future Event: Perhaps the most critical finding of all: exit planning is no longer something to consider in the distant future. More than 84% of best-prepared business owners are already engaging in value creation projects. The sooner you start building value in your business, the more you can enhance its attractiveness to buyers. Exit planning is, ultimately, good business planning—it ensures your company is positioned for long-term success and a significant financial return.
Start Your Exit Plan Now
The data is clear—business owners who invest in exit planning stand to gain the most when it is time to transition. Whether your exit is five years away or ten, planning early gives you time to close value gaps, align your business and personal goals, and ensure a smooth transition. Do not leave the future of your business to chance—start developing your Exit and Value Acceleration Plan today to secure your financial future and the legacy of your business.
For more insights into how exit planning can benefit your business, explore the full 2023 National State of Owner Readiness Report from the Exit Planning Institute.
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