Determining whether or not you are ready to transition and/or exit your business is an excellent first step to navigating a successful transition. You don’t want to regret the sale of your business, and the buyer doesn’t want to make it to the transaction table and have a seller back out at the last minute. Knowing whether you are ready is an important step in the right direction.
The Exit Planning Institute State of Owner Readiness Report 2017 for the Twin Cities Metro Area provides the following statistics related to owner readiness:
- A majority (60 percent) of business owners are between the ages of 50 and 69. The next largest group, at 14 percent, is ages 40 – 49.
- Looking at the company’s annual revenue, 52 percent reported an annual revenue of less than $5 million. 31 percent reported a revenue between $5 million and $25 million.The remaining 17 percent reported their revenue as $25 million or higher.
- When asked if having a transition strategy is important to them, 61 percent responded with “strongly agree,” and another 30 percent responded with “agree.” Just one percent responded that having a transition strategy is not important.
- The next question asked when owners think they might be ready to exit. While 23 percent reported they had no plans to transition, a majority had some sort of timeline in mind. 35 percent reported they would be ready to exit in 3 – 5 years. Another 24 percent said they would be ready in 6 – 10 years, and 18 percent said they would be ready in just 1 – 2 years.
- The final question asks, “Do I need my business to remain profitable?” A majority answered “yes,” with 31 percent saying it helps if the company is successful for the ownership transition and 29 percent saying it is critical for the company to be successful for the ownership transition. Another 26 percent answered that they have no transition plan, and the remaining 14 percent said the ownership transition is not affected by the success of the company.
The decision to exit your business is a big one, but taking time to consider these readiness questions can be a step in the right direction. Our Seven Steps to Succession Planning insight will help provide you with next steps once you’re ready to transition your business. If you’re looking for insight on transitioning your business, contact your Eide Bailly professional, Chad Flanagan or Derek Dockendorf.