A recent survey of American baby boomer business owners shows a real lack of preparation for transition of ownership1:
- 83% of business owners have no written transition plan
- 49% have done no planning at all
- 40% have no plans that cover illness, death, or forced exit
- 86% have not done a strategic review or value enhancement project
These are some scary statistics!
Why is Planning for Transition So Important?
- Not having a transition plan can leave other company members and customers vulnerable. This is especially true if the business is heavily dependent on the owner.
- Speaking from experience working with hundreds of business owners over the years, planning for the eventual transfer will be the key to your long-term happiness and well-being.
- Preparing is an opportunity you can give yourself. It includes the time to think, plan, and communicate with others who are stakeholders in your business.
How Should You Start Preparing?
Start by asking yourself some personal questions:
- Where do you spend your time now? Where would you like to spend it after you transition the ownership of your business to others?
- What passions did you have before you started your business that you may now want to pursue?
- What do you want more/less of in your life?
- What aspects of being a business owner do you most and least enjoy?
Expect your goals to develop and change over time, but you should start thinking about them well before the transition.
Next, think about your life and legacy:
- What does a successful ownership transition mean to you?
- Do you want to remain involved with the business in some capacity? If so, for how long?
- Are there key employees or family members you want to provide a secure future for?
- Would you like to retain some ownership in your business?
- What perks and benefits do you now receive from the company which you would have to pay for post-transition?
- Is the continuation of your legacy important to you?
No More Excuses
Many small and family business owners would probably say that they aren't planning to retire because they still need the income or they just enjoy working. The reality is that there are numerous reasons why owners haven’t done transition planning:
- They're busy running their businesses.
- It's too time consuming.
- It seems too final.
Whatever the reason, as a business owner who has worked hard and long in your business, don’t you want to determine your plan for the rest of your life?
If you are one of the millions of baby boomer business owners who will be looking to transition the ownership of your business to others during the next decade, we encourage you to develop and implement a transition plan 3 to 5 years in advance. Create a Business Ownership Transition Plan and prepare for what is likely the largest financial transaction of your life.
1 2013 survey conducted by EPI in partnership with Grant Thornton, PNC Bank and the Ohio Employee Ownership Center of Kent State University