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Exit Planning Statistics Business Owners Need to Know

The importance of planning with the end in mind.

Building a business that is saleable is no easy task. Saleable means having something that is good enough to be sold and that people will want to buy. Unfortunately, many businesses out there are not saleable. They may produce a profit and provide a nice income stream to the business owner, but ultimately it does not have transferable value. 

What is transferable value?

This is what your business is worth, to someone else, without you. Having transferable value is the common denominator and essential in having a successful transition. Unfortunately, many businesses are not transferable because of many different reasons. The main reason being if the owner was not able to show up every day, there would be no business. The owner ends up BEING the business. 

What are the success rates of selling a business? 

Unfortunately, this is very low. According to the Exit Planning Institute:

80% of companies below $50 million in revenue never sell. Meanwhile 3 out of 4 businesses will change ownership over the next 10 years. 

For those that do sell, 75% of those owners aren't happy due to not achieving the value they desired. 

94% of business owners have done no personal planning.

50% of owners have done no planning at all. 

80% of a business owner's net worth or financial wealth is tied up in their business. 

These statistics highlight the importance of exit planning.

Business owners should not assume that a buyer will magically appear when they are personally ready to exit. They need to take a hard look at their business and determine if it is saleable, and if not, make the necessary changes to increase its value. It is also important for business owners to have a personal financial plan and diversify their net worth outside of their business, as the statistics show that most businesses that go to market are unsuccessful. 

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