Jay Sachetti joined Jeff O’Brien, partner at Husch Blackwell and Dyanne Ross-Hanson, president of Exit Planning Strategies talked about the market for mergers and acquisitions, exit planning opportunities for companies that don’t end up for sale and how companies can maximize their eventual sale price during an early October panel at the first Upsize on Tap event at Summit Brewing Co. in St. Paul.
When the state Legislature passed a law requiring employers to provide paid leave and safe time for employees, Justin Bieganek started hearing differing details from friends, colleagues and peers.
1, The Minnesota State of Readiness survey indicates that half of businesses have not started an exit plan, a 20-percentage-point improvement from 2017.
2, Business owners commonly transfer their businesses to a family member, an employee or an external party with relevant experience.
3, Integrate exit planning into day-to-day activities several years before you intend to sell to ensure you are ready when the time comes.
4, One step owners can take to test their readiness to sell is seeing if the business can function with them away. If it can’t, take steps toward allowing it to do so.
The 2023 Minnesota State of Owner Readiness survey reveals a growing trend among business owners to prioritize exit planning yet highlights a significant gap: more than half have not yet formulated a formal transition strategy.
This underscores the crucial need for education to equip business owners for a successful business transition upon exit.
A business exit plan prepares an owner or owners by serving as a roadmap for the eventual departure from their company. It typically involves several advisers, such as a certified exit consultant, an attorney, a CPA, a financial adviser and a business broker/adviser. The goal is to help business owners successfully transition the business when they are ready.
Business owners commonly transfer their businesses to a family member, an employee or an external party with relevant experience, such as a strategic buyer or private equity firm.
The goal is to maximize the sale proceeds to ensure a successful transition that meets the owner’s personal, professional and financial goals while providing continuity for their employees, customers, suppliers and the community.
The previous Minnesota State of Owner Readiness conducted in 2017 included 43 percent of responses from baby boomers, while the 2023 survey had 27 percent of baby boomers, with most respondents representing either Gen X or Millennials.
The 2023 Survey indicated that respondents prioritize exit planning more now than in the past. Those who have started planning indicated their top priorities were written goals and objectives, a personal readiness to transition assessment, a documented personal financial plan and written and updated will and estate plans.
The 2023 survey indicated that 50 percent had not formed an exit planning advisory team. Although that may seem low, it was a 20 percentage point improvement from the 2017 survey. Efforts by the Minnesota Chapter of the Exit Planning Institute and other advisers are making strides in raising awareness of the benefits of exit planning.
The survey indicates that business owners’ most trusted advisers were financial advisers, attorneys and accountants. Retirement planning was a top priority for many, which was apparent with a high percentage of respondents seeking advice from financial advisers. A common question business brokers and financial planners hear is, “How do I ensure I have enough money in retirement once I sell my business?”
When asked what best describes how business owners plan to transition their businesses, the top answers included internal transfer to a family member; a transfer to an external party, such as an individual, strategic acquirer or private equity firm; or an internal employee stock ownership plan. Some indicated they were unsure.
Business owners will benefit from integrating value enhancements and exit planning into daily operations, including continuing to learn about the process. Some suggestions include:
Working in conjunction with your exit planning consultant, accountant, attorney, financial advisers, a business broker or adviser should be able to help you answer the following essential questions:
It is essential to keep in mind that 50 percent of all exits are forced from death, disability, divorce, distress or disagreements.
Even if the exit is planned for several years from now, preparing will provide benefits for years to come. In addition, according to The Family Firm Institute, only 30 percent of companies successfully transition to a second-generation family member and only 12 percent to a third-generation member.
Business owners must be familiar with all the potential transition options and be flexible to adjust the plan if needed.
One of the most important questions a business owner should consider is what they will do after they exit their business. Understanding their purpose outside of their business will allow them to feel more comfortable moving forward with an exit when they are ready.
Advisers can help with that too. So, in summary, establishing a team of advisers early will help business owners ensure a successful transition on their terms.
