A recent survey from Wilmington Trust and a team of academic advisors found that 58 percent of owners of privately-held businesses lack a transition plan.
The research, titled “The Power of Planning,” surveyed more than 200 owners of privately-held companies about their plans and goals for transitioning their business.
According to the research, the top reason for business owners delaying transition planning was their passion for the day-to-day process of running their companies.
Seventy-eight percent of business owners who did not have a transition plan said they enjoy managing their company too much to start thinking about a future transition.
Further, 42 percent responded they were too busy to start planning, while 44 percent felt that a transition was too far in the future to establish a plan.
“Business owners love what they do, so it can be difficult for them to imagine a day when they need to give it up,” said Matt Panarese, president of Wilmington Trust’s Mid-Atlantic region and leader of the firm’s National Business Owner Practice Group.
“The reality is that planning effectively and running a business are not mutually exclusive. Owners don’t need to walk away from the business they’ve spent their lives building to start thinking long-term. In fact, early planning can provide more flexibility and allow owners to continue to work in whatever capacity they choose—before and after a transition.
A surprisingly high 47 percent of respondents age 65 or older still do not have a transition plan in place. Yet 67 percent of all respondents said getting older is the top reason for creating a plan, followed by providing security for their family
“There are many good reasons for business owners to start long-term planning,” said Stuart Smith, managing director of the M&T Investment Banking Group, which, along with Wilmington Trust, is part of the M&T Bank family of companies. “Advance planning enables owners to continue to run the business they’ve built while addressing financial security for themselves and their families. It can also help them obtain a better result once they decide to transition.
“Many privately-held companies we work with bear the name of the owner on the building, letterhead, and even products, so business transition becomes a very personal experience,” said Smith. “There are times when we recommend a seller consider a buyer who is not necessarily offering the most money but shares the same values. Often a buyer who can help the business owner satisfy multiple goals related to family, employees, and clients is a better choice than the one with the highest financial offer.”
The full survey, including recommendations for building a robust transition plan, is available online at www.WilmingtonTrust.com/BusinessOwners.