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Lead Your Team Strategy

Exit Strategy? Most Small Business Owners Don't Have a Plan

Employee xit interviews can be 'won-win' both both side
. / Credit: Man walking out of door image via Shutterstock

Even though they expect to hand over the company reins in the next decade, most small business owners don't have a plan for how they'll do it, new research shows.

More than 60 percent of small business owners planning to leave their business in the next 10 years don't have an exit strategy and aren't working on one, a study by Securian Financial Group revealed.

Since the business represents a significant asset for most owners, researchers said by not managing and planning for it, the owner risks leaving its fate to chance. They said failing to develop an exit plan can leave the business, the family of the business owner, or the business's partners and employees in a very difficult situation.

"With no exit plan, the small business owner not only risks the future of the firm but also its ability to generate income for the founder," said Andrew O'Brien, director of client solutions for Securian Financial Group, a provider of insurance, investment and retirement plans.

There are a variety of reasons for small business owners' lack of action on how they'll eventually depart their venture. Specifically, 30 percent of those surveyed are more focused on growing their business, another 30 percent believe they are indispensable and 18 percent feel there is a lack of qualified candidates to replace them.

Other reasons include not having a prospective successor who can afford to buy the business, and small business owners too swamped with other work to plan for the future.

For those who do have a plan, selling the business is the most likely exit strategy. The study discovered that 33 percent of small business owners intend to sell to a third party, with another 20 percent planning to sell  to a partner or key employee. 

"More than half of the people we talked to plan to sell their businesses, either to a partner, key employee or third party," O'Brien said. "An exit plan helps the founder lay the groundwork for a successful sale."

The research was based on surveys of 500 small business owners in a variety of industries that have been in business an average of 18 years and have an average of 13 employees.

Originally published on Business News Daily.

Chad Brooks

Chad Brooks is a Chicago-based writer and editor with nearly 20 years in media. A 1998 journalism graduate of Indiana University, Chad began his career with Business News Daily in 2011 as a freelance writer. In 2014, he joined the staff full time as a senior writer. Before Business News Daily, Chad spent nearly a decade as a staff reporter for the Daily Herald in suburban Chicago, covering a wide array of topics including local and state government, crime, the legal system and education. Chad has also worked on the other side of the media industry, promoting small businesses throughout the United States for two years in a public relations role. His first book, How to Start a Home-Based App Development Business, was published in 2014. He lives with his wife and daughter in the Chicago suburbs.