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Business Owners Still Not Planning For Retirement

by Tony Montanaro
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Over one third (38%) of lower middle market ($5M to $50M valuation) business owners conducted no formal planning prior to the sale of their business, according to the Market Pulse Survey for 3rd quarter 20191. Businesses in the $2M to $5M range faired even worse, with 68% of owners failing to do any advance planning.

               Table 1: Business Owners Who Engaged in No Formal Planning Before Sale

For those owners who did plan, less than 10% worked with any kind of advisor (CPA, wealth advisor, attorney, or business broker) more than 2 years in advance. Proper development and implementation of an exit strategy typically requires between 2 to 5 years of advanced planning, depending on the strategy chosen. Some of the questions that should be considered are whether the business will be passed to a family member or sold to an outside party or employee? Will it be an outright sale or gradual sale? What are the estate and gift tax implication of transferring ownership to a family member? What if health issues force an accelerated exit? Having a long-term plan in place will help guide your current business decisions and mitigate uncertainties about the future.

As this data indicates, most business owners are missing out on a significant opportunity to maximize the value of their business, minimize tax implications, and ensure that they are left with enough cash to maintain a comfortable standard of living throughout retirement. A successful exit starts with building a team of experienced and trusted advisors who understand your business and your needs. Our experts are always available to have a discussion about your exit planning needs and to help put together a strategy to achieve your goals. 

1. https://bschool.pepperdine.edu/institutes-centers/centers/applied-research/research/pcmsurvey/

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