The Denver-based Business Enterprise Institute (BEI), which specializes in Exit Planning industry research and education, conducts a major survey of business owners every few years. The purpose of the survey is to examine owners’ beliefs, ideas, and actions as they relate to how they intend to plan for the future of their ownership, what steps they’ve taken towards planning for their exits, and what obstacles are perceived to be most pressing. The results of their 2022 survey provided some revealing statistics and identified changes that inform trends related to both business and exit planning.
Reponses were collected from more than 200 business owners throughout the US and Canada, which were proportionately distributed across geographic areas, industries, and age groups that are representative of the larger business owner population. Participating companies had annual revenues of more than $2.5 million and more than ten employees. BEI worked with a national independent research firm to collect data for this survey which yielded a confidence index of 98%.
Changes Revealed by the Survey
The survey results revealed several findings that point to changes in the demographics, thinking and activities of business owners.
- In previous surveys, it was typical for baby boomer business owners to respond more than any other age group, comprising 76% of respondents in 2019. In the 2022 survey, 77% of respondents fell between the ages of 25-54.
- Business owners are thinking about Exit Planning at an earlier age and sooner in their lifecycle as a business owner, with 48% of respondents between the ages of 40-54.
- A larger percentage of business owners are anticipating owning their businesses for at least the next 10 years, if not longer. In 2019, this group comprised 36% of the respondents, growing to 47% in 2022.
- When asked about how the COVID-19 pandemic impacted their plans to exit, more than 50% said it had no impact at all. Only 11 % said it motivated them to want to exit their business sooner than originally planned.
- Statistics, combined with the younger age of business owners, make it clear that owners are developing ways to maintain possession of their companies without continuing to actively work in the business.
- With the age of business owners shifting younger and the anticipated years of ownership getting longer, younger generations are thinking about Exit Planning and expect their advisors to support those efforts.
Perceived Obstacles to Exit Planning
61% of owners said that they have determined their financial needs and targets for a post-transition life. However, there are a number of perceived obstacles to a successful exit plan, or even starting one. Here are the most common, along with percentages of those who consider these to be issues.
- 58% – External factors such as economy, regulation, industry trends, and taxes.
- 39% – I need to improve management, systems, strategy, and/or efficiency.
- 36% – I don’t want to leave my business.
- 35% – I don’t believe I need to do it yet.
- 13% – My business can’t survive without me.
- 13% – I don’t have enough time, money, or energy to deal with exit planning.
- 10% – My business doesn’t have enough value to make a transition worthwhile.
- 7% – It will cause conflict in the company or in my family.
- 5% – I’m not sure what to do.
Many of these perceived issues or reasons to delay exit planning are concepts that are not based in fact. Others are simply procrastination which will only make the process of exit planning more difficult once it is addressed. An experienced exit strategist can help you separate fact from misperception and help you over the hurdles – the most difficult of which may be getting started. Our Exit Planning Peer Advisory Boards are an efficient, effective way to develop an exit strategy and stay on track, with support from other business owners and regular one-on-one consulting from me built in.
Several notable trends are uncovered in this survey, compared to previous years. A business owner community that is younger seems to be most prevalent. Owners are thinking about their exits at an earlier age, with a majority of respondents falling in the age range of 40-54. This presents the opportunity for longer-term exit planning, more time to build business value, and therefore a greater likelihood that owners can transition on their terms. There’s a growing interest among owners in stopping work without simultaneously transitioning ownership. This indicates a belief that their businesses are valuable assets that can produce returns without their involvement; perhaps it is also a greater motivation to focus on business value and value-based management that facilitates growing and sustaining that value. An increased number of owners are talking to advisors about planning, although the number of owners with written plans continues to hover around 20%. Find more statistics, insights, and access to the full report on the BEI website.
Exit planning may seem like a daunting task but it can be incorporated into the strategic and operational initiatives you already are or should be working on to build your business today. Why wait? Start now to seamlessly meld business growth and exit planning into your processes, and confidently and predictably create the future you envision. Contact me for a complimentary consultation.