The State of Owner Readiness: 2023

Introduction

It’s been ten years since the Exit Planning Institute issued the first State of Owner Readiness Report and in that time, there have been many changes. The recently issued 2023 State of Owner Readiness Report is the first report that has been national in scope compared to earlier editions that were focused on local cities. Preparing this report was an opportunity to compare the state of owner readiness back in 2013 with today. The results are enlightening but also indicate that there is still much work to do. In future editions, we will take a deeper dive into specific areas of the report, but today we will provide an executive summary of some key points found in the report. I’ll give the usual caveat that while this report has compiled based on US data, I have no reason to believe the Canadian market is vastly different so any insights are applicable here to Canadian business owners.

Top Five Takeaways

1)????? Shift in Generational Ownership

Back in 2013, the primary group of business owners preparing for exit were Baby Boomers. In fact, 73% of respondents were Baby Boomers with Gen X representing only 20% of respondents. In 2023, things have changed dramatically! The largest individual group is Gen X (39%), second was Millennials (21%), third was Gen Z (20%) and Baby Boomers only represented 19% of respondents!

Anyone who has studied generational differences knows they have very different attitudes towards a number of things. One of the key differences noted are the attitudes towards exit planning. In general, Baby Boomers have traditionally been resistant towards exit planning or even the thought of selling their business. In contrast, in the past ten years, we have seen a greater number of Millennial business owners come on board and with that, there has been a greater acceptance of the need to plan for a business exit. As a rule, millennials do not think they will be doing a particular endeavor forever. Rather, they are more likely to ask the question, “what’s next?”, which means that exiting their current scenario is more an intrinsic art of their DNA.

2)????? Increased Use of Outside Help

Owners have increased the use of outside help. In the past, many owners preferred to make their business exit a do-it-yourself project much like that car sitting in the garage that needs to be tinkered with to run properly or that gardening project that never seems to have a concluding point. However, business owners eventually came to realize that it takes a team to get to the finish line. The accountant, the lawyer, the insurance person, the wealth manager, the financial planner, the M&A advisor, the exit planner, the growth advisor, the business valuator, etc. Each of these people plays an important role in helping business owners successfully harvest the value of their business.

3)????? Education, Awareness, and Readiness Have Improved

It all started back in 2006 when “The $10 Trillion Opportunity”, written by Peter Christman, was published. Mr. Christman was the first owner of Exit Planning International and was a pioneer in the field of exit planning. He first identified the need for owners to start planning for their eventual business exit to increase their chances of success. In 2013, EPI was purchased by Chris Snider who introduced the Value Acceleration Methodology. The Value Acceleration Methodology introduced the concept that a successful exit required business, personal, and financial planning, what became known as the Three Legs of the Stool. Since then, exit planning education has only grown in both the United States and Canada, with now over 5,000 Certified Exit Planning Advisors (CEPAs). Combined with other exit planning advisors from the Business Executive Institute (BEI) and the International Exit Planning Association (IEPA), exit planning education has never been more robust.

This has all contributed to business owners being more aware of the need for advance planning and this has resulted in greater awareness of their exit options.

4)????? There has been a 50% Increase in Contingency Planning

One of the big keys in exit planning is to understand all the pieces of the puzzle that go into a successful transition. Contingency planning can include human resources, financial, and estate planning. Business owners have increasingly realized that they need to manage not just the risk of their business but also the risks associated with a successful transition and what that means to them on both a personal and financial level.

5)????? 75% of owners Want to Exit Their Business in The Next 10 Years

This means there is still a lot of work to do. Luckily, more business owners (and their trusted advisors) are more aware of the need to be proactive in planning. Don’t wait until you are “ready to sell” because history suggests this is a risky proposition. If you are a business owner, talk to your trusted advisor. If you are an advisor, ask your clients questions about their plans to transition.

Start the conversation today.

If you want to access the full 2013 State of Owner Readiness Report, please contact me and I can arrange to email it to you.