Half of U.S. businesses are up for grabs, and many don’t have an exit plan in place. “It is estimated that as many as 30 percent of businesses could be changing hands in the next five years,” according to an article in LVB.com
That’s because almost two-thirds of businesses are owned by Baby Boomers who are looking to retire within 10 years.
“Too many businesses don’t think about exiting because they’re too busy surviving,” said Jan Graybill, managing partner of Legacy Planning Partners in South Whitehall Township.
Chances are, other business owners are so closely identified with their businesses that retirement would be a loss of identity. People who have been the boss for most of their lives might have a hard time turning over the reins.
$3 Trillion on the Exit Line
But not having an exit plan in place can be costly. The value of those Boomer-owned businesses is estimated at $3 trillion. That value could be lost if an owner’s illness or death leaves the business in jeopardy. According to a Huffington Post article by Matt Roberg “only about 25 percent of saleable businesses exit.”
Owners need to have a list of prospective buyers in mind, Roberg said. He recommends a business model that creates recurring revenue–through subscriptions, for example. Prospective buyers will look for a pattern of growth–and they’ll want well-kept books so they can see those patterns.
On item Roberg notes that busy entrepreneurs may have neglected: Well documented standard operating procedures that would let a new owner step in with minimum fuss.
The Exit Planning Institute offers a one-page scorecard to determine how healthy a business is and how attractive it might be to a buyer.
As business broker Dan Bauer noted, selling a business is taking longer and longer. And buyers are getting scarcer and scarcer. “The younger generation is not looking to be business owners. There’s a lot of talk about that. That generation, they want to work for somebody, they want their nine-to-five job. The attitude isn’t what it was thirty years ago.”