New research from Wilmington Trust shows the power of planning for succession.
The survey, which asked more than 200 owners of privately held companies about their plans and goals for transitioning their business, found that 58% of owners of privately held businesses lack a transition plan despite financial risks of not planning.
According to the research, the top reason for business owners delaying transition planning is their passion for the day-to-day logistics involved in running their companies.
According to the survey, 78% of business owners who did not have a transition plan said they enjoy managing their company too much to start thinking about a future transition. In addition, 42% said they were too busy to start planning, while 44% felt that a transition was too far in the future to establish a plan.
"Business owners love what they do, so it can be difficult for them to imagine a day when they need to give it up," said Matt Panarese, president of Wilmington Trust's Mid-Atlantic region and leader of the firm's National Business Owner Practice Group, in a statement. "The reality is that planning effectively and running a business are not mutually exclusive. Owners don't need to walk away from the business they've spent their lives building to start thinking long term."
According to Panarese, early planning can provide more flexibility and allow business owners to continue to work in whatever capacity they choose — before and after a transition.
"What business owners need to realize is the sooner they start planning, the better their odds of achieving their goals — both financial and personal," Panarese said.
However, the survey finds that 47% of respondents age 65 or older still do not have a transition plan in place. Despite that, the survey also found that 67% of all respondents said getting older was the top reason for creating a plan.
The survey also asked business owners to describe the status of their future plans.
Of the 58% of business owners who do not have an existing transition plan, 27% said they had broad outlines, but nothing specific; 20% said they had considered, but hadn't started planning; and 11% said they had not thought about transition at all.
