90%
Up to 90% of the business owner's net worth is tied up in the business
75%
For lack of planning approximately 75% of businesses never sell
66
There are 66 potential obstacles to the successful sale of a business.
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In the last issue (#2), we provided some Amazingly Poor Business Sale Statistics. This issue examines reasons for some Amazingly Poor Business Exit Planning Statistics.
A Favorite Famous Quote
"There ought to be so many who are excellent,
there are so few." Janet Erskine Stuart
The previous newsletter provided statistics which indicate, depending on the size of the business, that only 20 - 33% of business are ever successfully sold. Why so few? It is primarily due to owners not realizing the need to plan for the sale of their business.
There are some amazing statistics regarding business owners failure to plan for the sale of their businesses. ROCG, a company that specializes in business transitions, conducted a survey from March through December of 2007 and published some of the results in October of 2008 in a white paper entitled: "Business Transition/Succession - The Increased Risk of Catastrophic Losses and What You Can Do to Avoid Them." There were 502 respondents to the survey - about 77% from the United States, 18% from Canada, and 5% from elsewhere. The respondents had annual revenues between $1,000,000 and $100,000,000.
| Not having an exit plan may put you on the road to failure. |
Only 9% of the respondents had a formal, written transition/succession plan! Another 33% indicated they had an informal plan. The white paper contained no further information on the extent, validity or effectiveness of informal plans. But, 58% had no plan! Other studies in 2007 by Mass Mutual and PricewaterhouseCoopers have also indicated that business owners are not adequately planning for the transition of their business.
Considering that other studies indicate the business itself represents 50-90% of a typical business owner's net worth, those statistics are amazing. In the ROCG survey, 84% of the respondents acknowledged that the proceeds from their transition were important to their future (15% critical, 28% very important, 20% important and 21% somewhat important). It may seem obvious that some planning is necessary to maximize the monetization of one's largest asset. Despite the importance, it is clear that business owners are not adequately planning for their business exit.
By asking the question "Why haven't you prepared a formal transition/succession plan," the ROCG white paper survey results help to explain the reasons for business owners' failure to plan their business exit. The following is a list in order of....
This 90-issue email newsletter series provides information about:
This 90-issue email newsletter series provides information about:
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Preview our free special report:
Insider Secrets to Selling Your Business
Packed with insider secrets to help you begin the process of thinking about your exit strategy. Whether you intend to sell in two years or ten years, this is a MUST READ!
Read our valuable free white paper:
Why It's Important to Plan the Sale of Your Business
If an owner recognizes the need to plan for their business sale and executes a plan to identify and address the obstacles to a sale, the 3:1 odds against a successful business sale can be reversed to 3:1 in favor of a successful business sale.
