Having read through the many and varied surveys and research reports conducted in Australia, the USA, the UK and Canada that relate to business sale/succession intentions, preparation and readiness, a familiar pattern in the statistics has emerged. Yes, the Pareto Principle – or the 80/20 Rule – is alive and well in the field of exit and succession planning! Let’s have a closer look at some of the relevant statistics (some have been rounded up or down to suit the topic, but not to the detriment of the underlying pattern):
- 80% of surveyed business owners are relying totally or in part on proceeds from the sale of their business to fund their retirement. Strangely, only 20% have a plan in place for how they are going to achieve this.
- Approximately 80% of business owners intend to find an external buyer or successor. Of these, at current success rates, only 20% will succeed in this endeavour.
- In Australia, around 80% of the 2.1 million privately-owned businesses employ 0-5 people – these are the businesses most likely to fail in their efforts to find an external purchaser due to their lack of scale and inherent risk profile.
- 20% of surveyed business owners have come to the realisation that they do not have a saleable enterprise and will just shut it down when the time comes.
- 80% of privately-owned businesses are totally or for the most part reliant on their current owner(s) – they are “principal-dependent”. Of these, 80% believe that with the right training and resources, the business could be successfully handed on to another person or persons.
- Only 20% would automatically contact a business broker or M&A advisor (you know, the people who spend every waking hour transacting business sales?) when the time came to sell. The remaining 80% would go to their accountant or lawyer, or, heaven forbid, attempt to do it themselves.
Sounds overly simple, but the message is clear. Many business owners are planning on relying heavily on sale proceeds to fund their retirement, but most have no plan for achieving this and will most likely go the wrong way about it when the time comes,. Failing to plan (sorry for the cliche) is very much planning to fail.
Every business owner has the opportunity to turn their enterprise into a saleable asset, given enough time, desire and the right advice, irrespective of its current size and performance. So take heed of Pareto and embrace the need for an exit plan, otherwise the whole journey could come to a thoroughly disappointing conclusion!