Entrepreneurs are risking failure by not coming up with a plan about how they will eventually exit the business, experts have warned.
The caution came after a report by accountancy firm Deloitte found almost three quarters of business owners have not given ‘adequate thought’ to how they will eventually exit the business.
The report found while in more than 70% of firms, the founders are still heavily involved in running the business, almost four in ten still have no plans in place as to how they will leave.
While more than a third of entrepreneurs said they have no exit plan in place because they are ‘waiting for an opportunistic approach from a third party’, the report found many entrepreneurs who did not have an exit plan encountered problems.
“More than 60% of family businesses are bought by private equity investors,” said Tony Cohen, head of entrepreneurial business at Deloitte.
“Unfortunately, the lack of planning results in difficulties agreeing a price, with owners reluctant to give potential investors access to vital financial information.
“On the positive side, good succession planning can ensure the family firm maintains independent ownership and stewardship, albeit in a metamorphosed business structure,” he said.
“An exit is not something which can happen easily and time spent planning for the inevitably and structuring the business correctly is seldom wasted.”
© Crimson Business Ltd. 2008
