Business Exit Strategies: Changing Lanes Too Fast on the Business Freeway!
Undoubtedly, all business owners would prefer to choose what happens to their business when they are no longer able to run it themselves. But very few take the steps required to ensure they have a choice around how and when they will exit. In fact, when almost 75% of today’s business owners reach retirement age in the next 5 to 10 years, a crisis is expected to arise.
Less than half of these entrepreneurs have taken steps to ensure a successful switch of the leadership and/or ownership of their business. Currently, only 3 out of every 10 businesses are expected to successfully transition through the second generation and only one of those will survive to the third generation.
And yet, 46% of families surveyed feel that the business has a de.nite impact on their family identity and that 87% expect the business will still be controlled by the family. Incidentally, 34% expect the next leader to be female. But, you need to be proactive in securing a future for your family and business. And it doesn't have to be complicated! First you need to accept the fact that One Day You Will Sell Your Business! Unfortunately, none of us can live forever.
So whether or not any cash ever changes hands, you will eventually have to get from the fast lane to the exit ramp. The secret is to ensure you have a voluntary “sale”. If you leave it too late, you risk a major collision trying to cross so many lanes so quickly- an involuntary sale.
It is much better to mover over to the right hand lane one lane at a time-a gradual transition.
You can continue in the slow lane until it is time to go down that exit ramp. You will have a choice around how and when to exit! Meanwhile, your successor needs to get from the on-ramp and quickly merge with the flow of traffic. The on-ramp ends quickly he or she can't take forever to merge.
Successors should drive for a while in the right hand lane until they are familiar with the surroundings. Then, when they have a bit more experience, they can move to the middle lane. Finally, they will have the experience and wisdom to be the lead driver and move into the fast lane.
Gradually, without causing a major collision, the founder and the successor have switched places!