In a recent release of findings from an ongoing research effort being conducted by Pinnacle Equity Solutions, Inc., a national leader in the emerging field of exit planning, it was revealed that 58% of business owners who are considering a future exit from their privately-held business currently have both a Low Financial Readiness as well as a Low Mental Readiness for an exit. Pinnacle categorizes these owners as Stay and Grow business owners and this newsletter discusses these findings and provides insights for owners of privately-held businesses to learn whether or not you fit this description and, if so, what you can do to improve your chances of a future, successful exit.
Exiting Your Business, Protecting Your Wealth – Financial and Mental Readiness
In October of 2008, John Wiley & Sons published John Leonetti’s book, Exiting Your Business, Protecting Your Wealth – A Strategic Guide to Owners and Their Advisors. This seminal book on the topic of exit planning provides a system for owners and their professional advisors to plan a business exit. This 6-step exit planning system surveys owners about their Financial and Mental readiness for an exit using a twenty question, ten-minute online survey tool called the Business Exit Readiness Index™ (BERI) Report. The BERI™ survey tool places business owners into one of four categories of ‘exiting owners’.
Four Types of Exiting Owners
The Exiting Your Business exit planning system ranks owners as one of the following:
Rich and Ready to Go
Stay and Grow
Well Off but Chooses to Work
Get Me Out at the Highest Price
The factors that place an owner into one of these groups are driven by their financial stability and relative independence outside of the business as well as their desire to continue working at their companies.
As mentioned earlier, 58% of business owners surveyed were categorized as Stay and Grow owners, meaning they DO NOT have enough money saved outside of their business to support their lifestyle AND they WANT TO continue working in their companies for the foreseeable future.
Traits of the STAY and GROW Owner
The following attributes apply to the 58% of owners who are categorized as Stay and Grow. These descriptions come from Chapter 4 of the Exiting Your Business book as well as from the BERI™ Report questions.
As a group, Stay and Grow owners generally:
Want to continue working
Remain interested and focused on growing the value of their businesses
Enjoy their work but would like to begin to diversify their wealth
Have not put their plans in writing
Estimate the value of their business to be more than 50% of their total worth
Like the idea of a management team but have not made the commitment
Have not completed their personal planning in the areas of estate and financial planning
These traits vary in degree amongst different owners but are the general areas where they all provide similar answers. Therefore, a Stay and Grow owner is someone who not only is highly interested in continuing to do what they are doing, but they also do not have the formal plans for the financial ability to stop working in their businesses. Again, 58% of the survey respondents fit this category.
Are You a Stay and Grow Owner?
Many of the traits above may (and likely do) describe your current ‘readiness’ for your own business exit. If that is the case, then it may make you feel good to know that you are in the majority of your peers who also rank themselves the same way.
A Little Planning Can Go a Long Way
Many owners who are Stay and Grow realize that despite the fact that they enjoy what they are doing today and are financially ‘required’ to continue doing the work, one day they would like to be able to choose the manner in which they successfully exit their businesses.
One of the best ways to prepare for a future exit if you are a Stay and Grow owner is to make a conscious effort to continue to save money outside of your business, while you also look to increase the value and transferability of your business so that someone else can own it after you.
I hope that this newsletter has accomplished the objective of having you understand what it means to be a Stay and Grow owner and, if you fit that description, how you can better understand your situation and make plans for a future, successful exit.
Also, if you would like to measure your own readiness for an exit, contact me to take the BERI assessment.
Pinnacle Equity Solutions © 2016
Member – The Business Intelligence Institute*
*Business Intelligence Institute associates are registered representatives of Lincoln Financial Advisors Corp.
Jeff Janes is a registered representative of Lincoln Financial Advisors Corp. Securities offered through Lincoln Financial Advisors Corp., a broker/dealer. Member SIPC. Investment advisory services offered through Sagemark Consulting, a division of Lincoln Financial Advisors, a registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. Lincoln Financial Advisors Corp. and its representatives do not provide legal or tax advice. You may want to consult a legal or tax advisor regarding any legal or tax information as it relates to your personal circumstances. CRN-2160861-062518