If you built a successful business, or if you purchased an existing business
and it continued to grow, you, the business owner, are probably thrilled
with the fact that your business is viable and has achieved measured growth
since it was established.
When you started or first bought your company, you might have worked long
hours and burned the candle at both ends as many entrepreneurs do. Your
energy and focus were on building a successful business, and you probably
weren’t thinking about how or when you would step away.
As you know, the business climate changes on a daily basis. Technology
advances, the economy ebbs and flows, and competitors come into play.
Even some of the most sophisticated serial entrepreneurs will say that
they have not perfected their exit strategies, or they will say that each
exit is different based on the circumstances.
In some cases, business owners will want to hand down their businesses
to their children. Sometimes, they have a difficult time leaving the company
they built, other times a business owner gets bored and simply desires
to move on to the next big challenge.
Whatever the circumstances, having a practical and feasible exit strategy
is important for all small business owners as it protects their financial
interests and allows them to leave their companies on good terms.
Small Business Owners Unprepared to Exit
According to an April 19, 2016 article in
Business Wire, small business owners who are planning to exit their business may be
in for a rude awakening.
The latest research from Securian Financial Group, found that the vast
majority of small business owners do not have an exit strategy.
“While 54 percent of business owners plan to leave their business
in the next 10 years, 72 percent have taken no exit planning action,”
said Andrew O’Brien, of Securian Financial Group.
According to O’Brien, the largest asset that most small business
owners have is their business. When business owners fail to properly plan
for the sale or transfer of their business, the business owner can be
left in a very difficult position, said O’Brien.
The study found that:
- 50 percent of small business owners intend to sell their business to one
of the following: 1) their partner, 2) a key employee, or 3) to a third party.
- 37 percent of small business owners intend to transfer their business to
one of their family members.
If an entrepreneur wants to step away from their business, the best plan
of action is a written exit plan developed by a business law attorney
collaborating with the business owner to ensure a seamless and successful
If you have questions about creating an exit plan,
contact the Chicago business law attorneys at Rifkind Patrick LLC today.