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Why Exit Strategy?
Consider this: 17% of small business owners are planning to leave their business in the next 2 years and 40% are aiming to leave in 5 years. Whether you live in the USA, Canada, Australia, NZ, the UK or South Africa the research is the same. There are a large number of Business Owners that will be looking to retire over the coming years. (1*)In the US in 2001, 77 million Americans were 50 and older (comprising 28% of the population). By 2020 that segment will be 36% of the population. Also, 30% of small business owners in USA are now over 50 years of age and this rate is increasing each year. (3*) In Canada it is estimated that within the next 15 years, more than half of the country’s current small business owners are expected to retire. (2*)
There is no doubt that, as the baby boomers near retirement and the average age of small business owners increases, the age-old laws of supply and demand will come into play. In such a crowded marketplace business owners will need to present their business in an appealing, professional manner to stand out from the competition and achieve the maximum return.
66% of owners in this country plan to use their business as their primary source of retirement income; 43% hope to realize a lump sum benefit from the sale of their business; and 31% expect an ongoing income stream.
For these people selling the business in order to retire, it is of paramount importance that the sale price will allow them to retire comfortably and not compromise their quality of life.
Research shows 70% of businesses think succession and exit strategy planning is important but only 12% have a documented plan. Unsurprisingly, the main motivating factor for the creation of a plan is age.
A major impediment to succession planning is that most entrepreneurs don't understand the drivers that underpin the creation of an Exit Strategy. Selling a business is a marketing exercise that requires planning, preparation and a compelling pitch. An Exit Strategy needs to be achievable and have a realistic timeframe and measurable milestones.
The MAUS Accredited Partner Program unveils the key issues that need to be addressed in an exit plan, encompassing all the unique features of your client's business, life situation and price expectations
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Sources:
1* - CPA Survey; Undertaken in March 2004
2* - The 2004 CIBC Small Business Outlook Poll Canada.
3* - USA Facts and Figures Squidoo www.squidoo.com