A recent survey found that 72% of small business owners have not taken action to make an exit or succession plan
Small business owners are just like the rest of us. Sure, they work a little harder than the average 9-to-5’er. (Okay, a lot harder.) But many find time to raise families. Pursue hobbies. Cultivate friendships. Disconnect from the daily grind every once in a (great) while.
And most small business owners aim to step back from the businesses they’ve built while they’re young enough, and spry enough, to enjoy many fulfilling years of retirement.
A goal worth fighting for, to be sure. And a goal that, per a recent survey out from Securian, thousands of Minnesota’s small business owners could struggle to reach in the coming years.
Securian surveyed 600 SMBs with revenues under $20 million and an average headcount of 27. Its top-line findings are enough to make you sit up straight: 54% of surveyed owners plan to leave their companies within 10 years, but 72% have taken no concerted action — no exit or succession planning — to make that happen.
Andrew O’Brien, director of Securian’s business owner client solutions group, puts it bluntly: “For most small business owners, the business is by far their largest asset,” he says. “Not properly planning for the sale or transfer of their business can leave a lot of people — including the business owner — in a very difficult position.”
Just 14% of surveyed owners have a formal exit or succession strategy in place. The remaining 14% are presently working on formal strategies, but haven’t completed them.
According to Securian, 90% of surveyed owners do not intend to close up shop when they retired or stepped away. Most intend to pass their companies on to partners, key employees or family members (such as sons or daughters), while 25% expect to sell to third parties.
Many members of that 90% are in for a rude awakening, says Channing Schmidt, a Securian employee who helps business-facing financial planners guide their clients through the advance planning process.
“A sale or transfer of a business involves multiple financial and legal steps that tend not to work well for the owner when rushed,” Schmidt advises.
And even the 10% whose companies won’t outlive them need to think seriously about how they’re getting out. Winding down a business is a complicated affair, particularly for firms with substantial liabilities. Bottom line: Before you buy that beachfront dream home, sit down with a planning expert for a candid conversation about your company’s future.