SUPPLY CHAIN LEADERSHIP:
Why is an exit strategy an important part of a good Succession Plan?
Studies show that approximately 70% of family-owned businesses fail after the first generation of ownership. WHY? One of the main reasons is that they fail to plan for how the first generation would exit the business, either by selling it or handing it off to the second generation.
There are six general types of exit strategies, and you should choose the one that is right for you early in the start-up phase of your business. The longer you wait, the less likely you are to deal effectively with sensitive, emotional issues like management transition, business ownership, and taxes in discussions with other family members.
The Six Types of Exit Strategies are:
2. Keep Your Business in the Family
3. Sell Your Business to Your Employees or Family Members
4. Sell the Business on the Open Market
5. Sell to Another Business
6. Do an IPO (Initial Public Offering)
Many first-generation owners have dreams of creating a legacy. This is fine, and it gives the owner a chance to groom a successor and perhaps retain some say in the business. But here is where the process breaks down for the majority of owners: they fail to plan for and create a formal succession plan.
A recently taken survey of family-owned small businesses, asking the owners if an exit strategy was part of their business plan, revealed some amazing statistics:
10% of the owners had a formal written succession plan
38% of the owners had an informal unwritten succession plan
52% of the owners did not have any succession plan at all.
So, if you are a first-generation small-business owner with dreams of passing the business on to a member of your family, remember this adage:
No Formal Exit Strategy = Kiss Your Legacy and Business Goodbye!
Don’t kid yourself about how important this process is. Formal succession planning done sooner greatly enhances the chances of a successful exit strategy for you!
It’s your legacy. How will you handle it?