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A well-worn business saying goes something like … not having a plan for selling your business is a plan for failure.
Maybe it’s not worn enough. Reason No. 1: One third of baby boomers, in a recent survey response, say they expect to sell or transition their business in the next five years. But more than a third of the respondents in the survey, from SunTrust, say they don’t have a specific plan for an exit strategy. And 21%, the survey found, “admit they are not financially prepared for retirement.”
The online email invitation survey, conducted by Wakefield Research for SunTrust, polled business owners between 54 and 72 years old with annual revenue of $5 million to $250 million.
Resistance to sell isn’t from lack of available exit opportunities. Baby boomer business owners have already received, on average, three offers to purchase their company, the survey shows. And this cohort of business owners, says Jason Cagle, head of commercial banking for SunTrust, have timing on their side, because they could retire “at a moment when the economy is growing and a high number of private equity firms are seeking investments.”
So why the lack of exit action?
The survey reports it’s a one-part soft, one-part hard resistance, from ego to (is there) enough money. “As a transition approaches,” the survey states, “cultural disruption, emotional readiness and the strength of the offer become more significant determining factors.”
In terms of the numbers, the top concern from survey respondents, at 44%, is whether the successor is ready to take over. After that, at 34%, is whether the outgoing leader feels financially prepared for the next step.
Concerns in exiting a business
Whether my successor would be ready to take over ownership 44%
Whether I was financially prepared for my next step in life 34%
Ensuring continuity of business operations 32%
Internal disagreement at the company about the best path forward 28%
Potential for employee layoffs 22%
Cultural disruption within the company 20%
(Respondents could answer more than category.)
Possible route to exiting a business
A private-equity firm or third-party investor 42%
Next generation of family 38%
Employees buying ownership 18%
Acquisition by former competitor 17%
An outside hire taking over leadership 16%
Passing down to an employee 14%
(Respondents could answer more than category.)
After exiting business
Retire fully 60%
Serve in an advisory role or a role with reduced responsibility at firm 26%
Pursue a philanthropic opportunity 15%
Pursue a new business opportunity 8%
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