Last week we asked our Advisor community why they think owners are reluctant to exit their company. Here are the results:
19% said the owner feels Trapped with high income needs
40% said the owner feels Uneasy with no plan for their next act
19% said the owner is misinformed on exit planning
21% said that the owner feels that it is not urgent and they are years from an exit
EPI Vice President, Scott Snider, provides a deeper look into this question:
According to the State of Owner Readiness Research, most owners indicated that they felt exit planning was in fact important, but it wasn’t urgent. In the same research we found that 61% of owners strongly agreed that having an exit strategy was important to their future and the future of their company, but nearly 80% of owners weren’t doing anything about it. Also, over 90% have done no personal or personal financial planning. But why? I think it leads us to the other options within in this poll. I think it’s generational. Depending on what you value and what point you are at in your life as a business owner you may in fact feel trapped. You may be taking so much income out of your business to fund your lifestyle that you couldn’t possibly think of not having your business around. It may in fact make you feel uneasy. You haven’t really investigated life outside of your business. Or perhaps you are simply just misinformed. Exit planning is something that you do 12 or 24 months before you want to sell your company, right? I can tell you that as a 15-year entrepreneur I have certainly felt all four along my career. There are times where I look at my lifestyle and I think, I don’t even know if I could fund my current wants, needs, and goals without the steady flow of income from my business. I am a 35-year-old business owner, I certainly don’t plan to exit any time soon. I know it is important but it is not urgent. And 10 years ago, when I had the opportunity to sell my first company, I was reluctant because I was uneasy. Uneasy because that was all I knew, it was my passion, it is what I loved doing. I didn’t really know who I was without it and what was next.
Point of the story is whether the owner is 15 years old and starting their business or 70 years old trying to exit their business, owners are misinformed about exit strategy. What they don’t realize is that by implementing an exit strategy today (regardless of age) they not only drive more efficiencies into their business, happier and more engaged and entangled customers and employees, better cultures, and more profitable revenues. Likely even more important is that it aligns their personal purpose and goals outside of the business with their personal financial plan. Decentralizing the owner is key. Building a significant company is what I think, as owners, we are all after. Ensuring we have enough money to provide for our families, communities, and nonprofits, and to fund our goals for many years to come post-business is critical. In my opinion, business owners are misinformed on the true benefits of having a living exit strategy that drives decision making daily. But there is also no doubt many owners feel uneasy, feel trapped, and feel that exit planning is not urgent. The only way to combat this is through education. And that education should be around Value Acceleration. The process that makes this all very deliberate and puts it in our daily jive as owners. Ensuring we hit all goals. Business, personal, and financial.
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