Article
Are you prepared to transition your family business?
Leverage Baker Tilly’s Value Architect model for exit planning
July 12, 2022 · Authored by Laurie Price
Exit planning has become an increasingly relevant and important topic. In the U.S., Baby Boomers account for an estimated 2.3 million small businesses in the U.S., and a large number of these businesses are thriving. However as they near retirement, nearly 60% of Baby Boomer-owned small businesses do not have succession or transition plans in place (Unsexy But Thriving Businesses: The Hidden Opportunity Gifted To Us By Baby Boomers, Forbes, Jan. 2022).
Recently, the International Business Brokers Association and M&A Source (IBBA and M&A Source) conducted research to determine the reasons these owners have decided to sell their businesses. While 36% of the business owners reported retirement as the main motivating factor, almost 50% reported a combination of burnout, health and COVID-19 as motivating factors.
Source: IBBA and M&A Source Market Pulse Survey was created to gain an accurate understanding of the market conditions for businesses being sold in Main Street (values $0-$2MM) and the lower middle market (values $2MM -$50MM). The national survey was conducted with the intent of providing a valuable resource to business owners and their advisors. The IBBA and M&A Source present the Market Pulse Survey. The Q1 2021 survey was conducted April 1-23, 2021 and was completed by 301 business brokers and M&A advisors from 44 states. Respondents completed 266 transactions this quarter.
Notwithstanding the reasons, most business owners reported that they have no formal plans regarding how to retire or exit from their businesses.
Baker Tilly’s point of view on exit planning is based upon Peter Christman’s seminal work on the topic. Christman, co-founder of the Exit Planning Institute, is an icon in the world of exit planning. Author of three books, “The Ten Trillion Dollar Opportunity,” “The Master Plan” and “Master Planning Success Stories”, Christman literally invented the discipline. His process focuses on developing an exit plan in three distinct areas to: 1) maximize the value of the business, 2) define a personal financial plan and 3) create a life plan for post-transaction.
