Exit Planning: New Study Shows Most Colorado Business Owners Are Not Ready to Sell Their Businesses
Without proper exit planning, some Colorado business owners might not be able to find a buyer for their business when the time comes.
The Exit Planning Institute (EPI) recently conducted research to better understand the exit readiness of Colorado business owners and to see how prepared Colorado business owners are for an eventual sale. What we found was interesting and insightful, and underscores both the uniqueness of this region and the growing and evolving discipline of exit planning.
The Colorado State of Owner Readiness Report features survey results from over 400 business owners in Colorado. Survey results showed 95% of Colorado owners felt that having a transition strategy is important for both their future and the future of their business. Yet, 48% of owners stated they had no written personal financial plan and 65% indicated they had no formal or written transition plans.
Despite understanding that having a succession plan is critical to both business success and their own future, the survey results highlighted many reasons business owners had not started exit planning. The most common reason was owners were too busy growing their business to focus on exit planning. In addition, nearly 10% of owners did not have a transition strategy in place because they did not understand how to start the process. In fact, the survey found that 68% of business owners in Colorado are unfamiliar with their exit options.
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The impact of ill-prepared owners in a transition can be both economic and social. Applying these survey results across all Colorado businesses, we can project that more than half of all privately held companies will look to transition within the next 5 years, equating to approximately $1.7 billion in value. Without a proper exit plan, some of these business owners will not be able to find a buyer for their business, and of the ones that do, many may not maximize the outcome or end up regretting their exit from their business.
The first step to an effective exit strategy begins with understanding the value of your company. Nearly 71% of those surveyed indicated they had not completed a formal valuation or had no clear understanding of their company’s value at all. In addition to understanding value, exit planning integrates business planning with personal planning so business owners can prepare for a fulfilling and significant exit from their business.
If Colorado business owners want to rapidly grow the value of their company while creating significant wealth for themselves and their families, they must get educated on the exit process, create a formal transition plan, and concentrate on understanding and accelerating the value of their business. Our findings show that Colorado business owners are already aware of the importance of exit planning, but with the help of qualified professionals, these business owners can ensure their transition plan sets both their business and their future up for success. The good news is Colorado is home to numerous exit planning professionals. These professionals include Certified Exit Planning Advisors (CEPAs) in the Rocky Mountain Chapter of the Exit Planning Institute.
The full results of the Colorado survey can be found in The 2022 Colorado State of Owner Readiness Report.
Scott Snider is the president of Exit Planning Institute and a nationally recognized industry leader, growth specialist, and lifetime entrepreneur.