50 Key Statistics On Business Exit Strategies for 2024

key statistics on business exit strategies

Whether you’re ready to exit your business or just curious about what the state of the industry looks like, here are 50 key statistics on business exit strategies for 2024.

Exit Planning and Readiness

With 75% of business owners aiming to exit within the next ten years, many are still underprepared, with nearly half having no formal strategy in place. This lack of planning could result in missed opportunities within a market poised for $14 trillion in transitions.

  1. 75% of business owners want to exit their businesses within the next ten years.
  2. 73% of privately held companies in the U.S. plan to transition within the next 10 years, representing a $14 trillion opportunity.
  3. 79% of business owners plan to exit their businesses in the next 10 years or less.
  4. 48% of business owners who want to sell have no formal exit strategy.
  5. 74% to 57% of business owners, depending on the deal size, did no exit planning.

Lack of Planning

Only 17% of business owners actually have a formal exit plan, and over half have never had their business appraised, which leaves many unaware of all of their exit options.

  1. Only 17% of owners have created a written exit plan.
  2. 58% of owners have never had their business formally appraised.
  3. 70% of business owners were unaware of all their exit options in 2013, but this has improved to 70% awareness in 2023.

Importance of Early Planning

Early and strategic planning is essential for a successful exit, yet many owners mistakenly believe they can sell their business in under a year, often underestimating the time required.

  1. Effective exit planning requires careful consideration and preparation, ideally starting long before the actual business sale.
  2. It takes 3 to 5 years to develop a comprehensive exit plan.
  3. 75% of owners believe they can sell their business in a year or less, which is often unrealistic.

Exit Strategies Preferred

Most business owners (52%) prefer selling, but 20% aim to pass their business to family, despite the majority of heirs lacking interest in taking over.

  1. 52% of respondents prefer selling the business, with 41% planning to do so within five years.
  2. 20% plan to leave the business to family, but 89% won’t pass their business on because family members are not interested.
  3. 18% plan to close the business, and 10% don’t know.
  4. 60% of first-generation business owners favor an internal exit, while 82% of second-generation business owners favor an internal exit.

Reasons for Exiting

Retirement is the primary motivation for 65% of business owners ready to sell, with nearly half also seeking a better work-life balance, particularly among Baby Boomers and Gen X.

  1. 65% of business owners say it is a good time to sell and they are ready to retire.
  2. 49% are looking to find a work-life balance.
  3. Retirement is a top reason for exit, especially among Baby Boomers and Gen X.

Family Involvement

Although some owners hope to pass their business to family, 82% of heirs prefer the money from a sale, and many cite lack of interest or qualification as barriers.

  1. 82% of heirs would rather have the money from the sale of the business than the business itself.
  2. 21% of respondents cited lack of qualification as a reason for not passing the business to family members.
  3. 9% wanted family members to take another career path.

Market and Timing

Proper timing can significantly impact the success of a business exit, and external factors like the pandemic have heightened the urgency for well-prepared exit strategies.

  1. Timing is crucial; having an exit strategy allows you to capitalize on strong market conditions.
  2. The pandemic and shifting age of owners have made exit planning more critical.

Emotional and Personal Readiness

Planning an exit helps owners mentally prepare for the transition, though 75% regret selling their business just a year later due to insufficient emotional readiness.

  1. Exit planning helps owners mentally prepare to exit by identifying goals and conditions for exit.
  2. 75% of owners profoundly regret selling their business just a year after selling it.

Financial and Business Readiness

An exit plan reduces business risk and ensures a smoother transition by aligning leadership with a strategy to grow and preserve business value before the sale.

  1. Exit planning reduces business and financial risk, makes the business transition-ready, and aligns business leadership around growing enterprise value.
  2. Early planning enhances the value of the business and ensures its longevity beyond the owner’s tenure.

Advisor Involvement

Engaging advisors is critical to successful exits, with 85% of top-performing owners having sought outside advice, trusting financial advisors most in recent years.

  1. 85% of owners who believed themselves to be best-in-class or better in exit planning had sought education, and 84% received outside advice.
  2. Business owners believe their financial advisor is their most trusted advisor, while an accountant was the most trusted advisor in 2013.

Specific Exit Strategies

Popular strategies include selling to employees through ESOPs, merging with other companies, and management buyouts, each offering distinct advantages depending on the business’s goals.

  1. Employee Stock Ownership Plan (ESOP): A strategy where the owner sells shares to a trust for the benefit of employees.
  2. Merger with Another Business: Combining businesses to create value for both parties.
  3. Management Buyout (MBO): Restructuring the business’s capital structure to prepare for a future exit.
  4. Liquidation: Selling the assets and liabilities of the business and distributing the proceeds.

General Statistics

100% of business owners will eventually leave their businesses, with 53% planning to do so within the next 10 years, and the COVID-19 pandemic had little impact on many exit plans.

  1. 100% of business owners will leave their businesses, whether planned or otherwise.
  2. 16% of business owners plan to exit their businesses in fewer than five years, 37% plan to exit within 5–10 years, and 47% plan to exit in more than ten years.
  3. More than 50% of owners said the COVID-19 pandemic made no impact on their plans to exit, while 11% said it made them want to exit sooner.

Owner Readiness

More business owners now prioritize exit strategy, with a rise in formal education and planning, particularly among Millennials who are adopting comprehensive personal and business plans.

  1. 69% of business owners identified exit strategy on their priority list, up from 6% in 2013.
  2. 68% of business owners have formal exit planning education, up from 35% in 2013.
  3. 56% of Millennial owners have written personal plans, 55% have written company plans, and 68% have written personal financial plans.

Valuation and Preparation

A formal business appraisal is essential for a successful sale, yet 58% of owners haven’t taken this step, potentially leading to undervaluation and missed opportunities.

  1. 58% of owners have never had their business formally appraised.
  2. Giving yourself ample time to plan will help you avoid oversights, undervaluation, and other obstacles.

Post-Transition

Awareness of exit options has significantly improved, with more owners including detailed personal planning in their strategies compared to previous years.

  1. 70% of business owners said they were aware of all their exit options in 2023, up from 34% in 2013.
  2. 52% of business owners include written detailed personal planning in their exit strategy, compared to only 9% in previous surveys.

Types of Exit Plans

From delaying decisions (“Wait and See”) to depleting resources (“Scorched Earth”), businesses need tailored, comprehensive exit plans to ensure optimal outcomes.

  1. The “Wait and See” Exit Plan: Delaying decisions, which can be detrimental.
  2. The “Scorched Earth” Exit Plan: Depleting the business of all cash resources, often inappropriate for businesses with dedicated staff and customers.
  3. The “Holding the Bag” Exit Plan: Forcing out co-owners on unfair terms.
  4. The “Canned” Exit Plan: Using a cookie-cutter approach that fails to tailor to the business owner’s specific objectives.
  5. The “Deathbed” Exit Plan: Developing an exit plan too late, from the deathbed.
  6. The “Well-Rounded, Comprehensive” Exit Plan: A time-tested process that addresses all needs and produces the best results.

Advisor and Team Involvement

A well-rounded exit strategy involves collaboration with trusted advisors such as accountants, financial planners, and attorneys to guide the business owner through the process effectively.

  1. Exit planning involves creating a partnership with trusted advisors such as accountants, financial advisors, attorneys, and consultants.

Conclusion

Understanding these key statistics on business exit strategies is critical for business owners preparing for a transition. Proper planning, timing, and involvement of trusted advisors can greatly influence the success of an exit, especially in a market where many owners are unprepared. 

Whether through selling, passing the business to family, or choosing other strategies, early and thoughtful preparation is the key to maximizing business value and ensuring a smooth transition.

Sources: 

  1. https://smallbiztrends.com/business-exit-strategy/
  2. https://www.centerconsulting.org/blog/what-is-exit-planning-and-why-should-every-business-owner-care
  3. https://www.allbusiness.com/business-exit-strategy-business-plan-119617-1.html
  4. https://ffpforme.com/blog/planning-for-a-successful-business-exit-seven-key-factors-to-consider/
  5. https://www.dgpcapital.com/2022/11/plan-business-exit/
  6. https://www.bernstein.com/who-we-advise/wealth-management-for-business-owners/business-exit-planning.html
  7. https://howtoplanandsellabusiness.com/how-to-sell-a-business-newsletters/amazingly-poor-business-exit-planning-statistics/
  8. https://btctampa.com/blog/some-exit-planning-statistics-to-consider/
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