Getting Out – Have You Prepared A Transition Plan? / by Kerri
Preparing a written transition plan is a critical element of your whole exit strategy. But surveys consistently verify that CEOs avoid this element regardless of age, or size of the business. There’s a concerted dearth of attention to how they will transition out of the business by CEOs, never mind determining to what they are transitioning.
- Fail to get the highest possible value for their business, or
- Transfer it to an ill-prepared successor, or
- End up paying too much in taxes
or even all of the above.
Whatever your goals or your timeline, it is time to plan for your exit now. Experts agree that if you want to maximize the value from all your sweat equity, you must invest in proper planning years in advance of your intended exit.
The ROCG Report results confirm:
- There is an overall lack of planning. Their survey found that only 9% of business owners have a formal written plan that includes succession and transition planning for the business. That means 91% of all CEOs in the US have no plan on how they will transition out of day to day operations.
- Current estimates report that more than 40% of business owners plan to exit within the next five years; and 80% of all business owners plan to exit within the next 10 years.
- But on a timeline of market trends, there will be many more sellers than buyers in the market place from 2013 – 2018, just when that first 40% are expecting to sell their business.
It is a disaster waiting to happen. It will only be compounded when you add in the fact that 21 million baby boomers will be selling off their businesses over the next 15 years.
Will widespread catastrophic losses be the result?
Without proper advance planning, we could see wave after wave of business owners fail to get out with the wealth they need for their reinvention. These CEOs:
- May not be in position to maximize their personal finances for financial independence when they sell sale;
- May be forced to sell at a deep discount or accept unfavorable conditions;
- May risk a business closure, leaving them with nothing;
- May have a business that ultimately fails and/or potentially destroys family harmony in the transfer to family members.
Timely transition planning is a core strategy to avoid facing these types of obstacles and despair. Pro-active strategic business planning and transition planning can help to ensure that the transition is successful at meeting all your goals for the business as well as your lifestyle and legacy objectives.