Top 5 Reasons Business Owners Don’t Have an Exit Plan
In CKS’ experience helping business owners who are ready to transition, there are inevitably issues that must be resolved before a sale can happen. Realistically, with prior planning, these items are easily handled and a smooth transition is possible. However, business owners are also very busy running their business and usually have not thought through some of the issues.
Below are some of the top reasons we have heard from our clients:
- Not Enough Time. This is the most common excuse, and for good reason. Daily operations and related responsibilities are a huge time burden and it can be difficult to take time away to make a plan that might not be used for years. Even though it may not seem important right now, having a plan as soon as possible is an absolute must.
- It’s Too Complicated. There are many financial and legal implications involved when a business undergoes ownership change. Owners often feel overwhelmed by all that is involved, and many just avoid facing it. Besides, how can one person be expected to handle all of that? We understand how you feel! Consulting with an experienced exit planning professional who can guide you through the process is something that has helped many owners overcome their anxiety and achieve successful exits.
- Retirement Isn’t an Option. It is commonplace for owners to be deeply attached to their businesses. Being a business owner is part of who they are, and life after business seems unimaginable. However, starting the planning process early ensures the best possible outcome for yourself and your family, even if you aren’t ready.
- Still Building Value. If you are focused on growing the value of your company well in advance of an exit, you are already on the right track. It takes considerable time and effort to maximize the value of your company. This is why owners within ten years of retirement should spend most of their time establishing sustainable growth, a strong management team, efficient processes, etc. There are a number of crucial factors every owner should address long before they leave the company that a qualified professional can help address.
- Generational Wealth Transfer. The legal, tax, and technical issues are daunting enough without the additional emotional aspects of transitioning the parent’s business to the next generation. This type of transfer typically raises other questions such as will the company succeed, are the children/family members ready, and will the transaction end up causing more problems than its worth? These are all valid questions, and ones that require decisions to be made before the transaction.
Risks of Not Planning Ahead
It is understandable if you have avoided creating a solid exit strategy because of one of the reasons above. However, it is critical to understand the necessity of having one in place long before an actual exit. Owners that don’t have a plan often get a fraction of what their business is worth, don’t let this happen to you.
What You Can Do Now
If any of the reasons outlined sound familiar, there are several steps you can take to start preparing yourself for a transition from your company:
- Speak with your professionals you currently have (wealth manager, accountant, lawyer, etc.).
- They will likely have advice and recommendations for you moving forward. If there are issues they cannot help you solve, it may be time to for you to consider hiring a business advisor who can help you set your company up for a transition.
- Beginning the transition process early will ensure a simpler transaction process.
- Click here to see what CKS Advisors can do to help you prepare for a transaction.