How will you leave your small business the last time?
Every small business founder gets to decide when they will start their small business. But when and how they leave the business is much less in their control.
There is no comprehensive research that breaks down the different ways small business owners divest of their businesses. But I have spent decades working with and observing the small business sector and, based on that experience, here are my thoughts and a few stats applied to responses we received to this online poll question: What will be the most likely exit scenario from your business when the time comes?
Almost one-third of our respondents said “I expect to sell my business to a new owner.” Sadly, this expectation level doesn’t match reality. The business brokerage industry reports that the success rate for selling a small business is approximately 20%. That means one in five of those who want to sell, will actually be sold. But more small businesses would be viable candidates for buyers if they operated with more with professional systems, practices, and recordkeeping instead of like a lemonade stand where they buy stuff and sell stuff and hope things work out.
Fourteen percent of our sample said, “I plan to convey my business to family members.” The historical experience for family business continuity to first generation is that 30% will do so. If our respondents are representative, there are several contemporary forces that could be causing this declining ownership transfer response. But it looks like business owners who have dreams of a family dynasty should be less presumptuous about that possibility in the future.
Only six percent of our folks said, “I will probably just lock up one day and not come back.” Unfortunately, like those who expect to sell their businesses, this number is probably not reflective of reality. When all small businesses are taken into consideration, from sole proprietors to those with more critical mass, most will simply turn the lights out one last time.
Our largest group, 49%, said, “I probably won’t retire, I’ll just go out feet first.” This response option was intended to be a little dark humor in two directions: 1) for those who believe they will have to work until they die; and 2) for those (like me) who love their work so much they don’t intend to retire. In any generation, this group and the one above will make up more than two-thirds of all small business divestitures.
One thing is certain about the relationship with your small business: One day in the future will be the last in your business.
Write this on a rock...Are you making plans for that last day?
For a short video from Jim on this topic, click here.
Jim Blasingame is creator and host of the Small Business Advocate Show. Copyright 2013, author retains ownership. All Rights Reserved.
