Boomer Business Owners Lax on Exit Planning

A news release from Atlanta-based White Horse Advisors, LLC, a financial adviser for closely held businesses and plan sponsors, said the lack of preparation could grow out of a belief by executives that they can wait until a few years before their planned retirement. The company said procrastinating entrepreneurs putting off deciding on an exit strategy could run into a supply and demand problem with the large number of Baby Boomers expected to retire around the same time who might all be trying to sell their firms.

According to the announcement, 96% of Baby Boomer business owners agreed that having an exit strategy was important, but nearly all, 87%, do not have a written, current exit plan.

Approximately eight in 10 owners say that minimizing taxes, adequately determining the value of the company, and meeting other part-owners’ objectives are a “major concern” or “somewhat of a concern.”

“The implications of these results are far reaching. We face a tsunami wave of Baby Boomers selling, closing or passing along their businesses in the next 10 to 20 years,” said Patrick Ungashick, founding partner of White Horse Advisors, in the announcement. “Closely-held businesses account for nearly half of private sector payroll and approximately 80% of net new private sector jobs in the last 10 years. Therefore, we can expect this trend to impact not only owners, employees, and families, but the economy as a whole.’

Other survey results include:

Half of owners surveyed have an aggressive exit time frame, indicating they will leave their business within the next 10 years. Owners who are 60+ years in age have the most aggressive exit timelines, yet two-thirds of them do not have an exit plan.

• The average number of years to exit is 7.7, and the vast majority of owners believe that achieving their ideal time frame for exiting their business is attainable.
• The number of years left before a corporate departure plays a role in how much attention owners have given to exit planning. Owners who consider themselves more than 10 years away from their ideal date have given the matter less attention than those within a decade of their exits.
• At least two-thirds of owners indicate their top three essential or important exit planning objectives include achieving personal financial security, maintaining harmony within the owner’s family, and achieving the maximum value for the business.
• The survey was conducted in cooperation with Vistage International using a random selection of business owners across the U.S. A total of 58 groups participated in the study, representing 444 survey respondents. The survey was administered between October 2007 and February 2008 by Atlanta-based CMI.

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