Why you need to start thinking about life after your business

While driving into work, I was listening to my local public radio station talking about 40-year high school reunions.
The commentator wondered why we are always so surprised about how quickly time has passed since we were 18; after all, as long as we are alive, we should expect to get that 40th anniversary invite.
The Exit Planning Institute, in conjunction with the University of San Francisco’s Gellert Family Business Center, just released its 2015 State of Owner Readiness for Transition survey, building upon data from 2013. The study assessed how prepared owners are for management succession or exit.
And just like when we get that high school reunion note, the study found that fewer than 10 percent of business owners have done any planning at all — even though the great majority of their personal net worth is attributable to the value of their companies.
The report’s more telling details indicate that:
■  Out of 401 respondents, evenly split male and female, 90 percent had annual revenues of $5 million or less, consistent with overall U.S. demographics.
■  Sixty-five percent of those surveyed were aged 50 to 69 and 7 percent were older than 70.
■  Despite the age of the founder, almost 80 percent still believe it’s too early in the life cycle of the business to initiate a strategic review to maximize company value.
■  While 55 percent agree having a transition plan is “somewhat important,” two-thirds have given planning “little or no attention.”
■  Five out of 10 report their biggest concern is minimizing taxes upon transitioning, but 90 percent have not initiated value enhancement, de-risking or tax management initiatives.
The 2015 results are eerily consistent with EPI’s 2013 survey. In some ways, owners’ planning and preparation has worsened in the last two years.
“Transition of any kind is a very sensitive and emotional issue for owners, but the statistics consistently show that they are leaving their personal financial future and business legacy to chance,” says Sean Hutchinson, CEO at San Francisco-based Strategic Value Advisors.
Many owners are anxious about the inevitable need for succession, but it’s going to happen at some point.
Get started by developing a business transition plan. It doesn’t have to be costly and could simply entail a low or no cost sit-down consultation with a representative from your local Small Business Development Center or the Service Corps of Retired Executives.
There are various business roundtables where in a facilitated and collaborative environment; business owners can share insights about the continuity planning and transition process among like-minded and experienced peers. Many universities also have family business centers that can provide a range of supportive technical assistance services.
What you don’t want to do is wait around to be surprised by the passage of time. The clock is ticking and you can influence it. ●
Monika Hudson is an assistant professor and director of the University of San Francisco’s Gellert Family Business Resource Center; Sean P. Hutchinson is co-founder and CEO at Strategic Value Advisors.