Business Owners Can’t Always Control When They Sell

A Forbes article, “Study Shows Why Many Business Owners Can’t Sell When They Want To”, written by Mary Ellen Biery, suggests some interesting ideas. The article discusses an Exit Planning Institute (EPI) study that outlined the reality that many business owners can’t always control when they sell. Although many business owners expect to be able to sell whenever they like, the reality is that for business owners, selling is often easier said than done.

EPI Study

President and CEO of EPI, Christopher Snider, noted that a large percentage of business owners have no exit planning in place. Most owners have up to 90% of their assets tied up in their businesses. According to Snider, most business owners will have to sell within the next 10 to 15 years. Yet, most are not prepared to do so. Only 20% to 30% of businesses that go on the market will actually sell, according to the EPI. Snider believes the core of the problem is that there are not enough good businesses available for sale.

Baby Boomer business owners, expected to begin selling in record numbers, are still waiting to sell as of 2016. Snider stated in the article, “Baby Boomers don’t really want to leave their businesses. They’re not going to move the business until they have to, probably when they are in their early 70s.”

The EPI survey of 200+ San Diego business owners found:

  • 53% had given little or no attention to their transition plan.
  • 88% had no written transition to transition to the next owner.
  • 80% had never even sought professional advice regarding their transition.
  • 58% currently had handled any form of estate planning.

 

Most surveyed business owners don’t know the value of their business. A large percentage of the business owners who will be selling their businesses are Baby Boomers. They plan on holding onto their businesses until they are older. They have not charted out an exit strategy or transition plan. These business owners have no tangible idea on the true worth of their businesses.

In Snider’s view, the survey indicates that many business owners are not “maximizing the transferable value of their business.” Additionally, they are not “in a position to transfer successfully so that they can harvest the wealth locked in their business.”

All business owners should be thinking about the day they will have to sell their business. EBIT Associates can help you with your exit strategy so as to maximize your business’s value.

Goodluz/BigStock.com

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