Nearly all business owners we meet with tell us selling or transferring their business is a top priority in securing its full value to fund their retirement. We’ve found out these same owners are inadequately prepared to sell or transfer their life’s work. Even though most of them understand a transition strategy is important, less than 28% are remotely prepared to sell withing the next 7 years. Sadly, more than 70% of these owners won’t be able to sell their business when they’re ready, because they don’t, won’t or can’t take the critical steps necessary to get the full value of their business.
“Your business likely represents 80-90% of your financial assets. How can your estate or wealth management plan be worthwhile if you don’t, 1) plan to transition your life’s work and 2) have an accurate understanding of what your business is worth today?” – Scott Spector
National estimates are that nearly 5 million business owners representing more than $10 trillion in business value will transition over the next 7-12 years. Financial and strategic buyers’ focus continues to evolve towards businesses that are attractive and ready to enter the market. Most boomers aged 55+ continue to hold onto their businesses longer than their predecessors. At JSP, we understand you don’t want to leave your business. However, if you’re not moving forward and getting better, your business is merely stagnating and getting worse.
Maybe you have some tread left on your cleats and you want to continue to play a few more games. We get it; we want to see you win the game! Unfortunately, many of you are waiting or procrastinating until it’s late in the game to begin planning for the eventual sale or liquidation of the business. What are you waiting for? Exit on your terms not someone else’s! Nearly all the business owners we speak with have no answer to that question. When we bring up several reasons that may be influencing and impacting this non-movement, we see the air leave the room.
No one is waiting to yell – GOTCHA! Please get out of your own way. There are so many questions, so many ‘what-if’s’ that the hurdles many owners face selling their businesses when they want, or at the price they want seem to place them a physical, mental and emotional quicksand. Here’s some stats to chew on from our 55+ business owners*:
Over 50% have given little to no thought to a transition plan
Over 65% have no transition plan at all
Over 75% have never sought advice about a transition
Over 70% have no idea how much after-tax income they need to support their lifestyle
<60% have an estate plan.
<70% of those say their estate plan doesn’t provide for the sale of the business
<33% of their estate plan doesn’t include a business valuation that’s <7 years old
<50% of businesses with multiple partners have a buy-sell agreement in place
<30% of businesses considered a professional manager or management succession
<25% of owners have confidence in their management team without their involvement
You need help and you need it now. Many owners aren’t positioned well because they’re not optimizing their financial and operational metrics – they’re not maximizing the transferable value of the business. The business is not positioned to transfer successfully so they can’t cultivate or harvest the wealth trapped in the business. If nearly 90% of your investment is in your business, what do you think will happen if you don’t prepare for what’s next?
“You can’t start working on the asset until you know what it’s worth,” – Doug Huertas
Many business owners don’t have a good idea of the value of their business. Your business’ value is not based on revenue projections or prospects or order commitments. Your business’ value is largely based on free cash flow – the cold hard cash the business generates. Stop viewing transition plans as important but not urgent. We invest inordinate amounts of time with business owners educating them about the process and the importance of investing their time in planning for an eventual sale, transfer or exit. It’s your business. You control how prepared you are for the eventuality. Let’s talk about options and your objectives... the conversation continues…
