Avoiding the 75%

According to surveys by both the Exit Planning Institute (2013) and PwC (2021), 75% of business owners are either “unhappy” or “profoundly unhappy” one year following their exit from the business.

For a number that is so dramatically unfavorable, why hasn’t the entire industry adjusted to address this issue in nearly a decade? In this article, we will examine why so many business owners are unhappy and what advisors should be doing to rectify the situation.

Loss of identity

Anyone who works regularly with business owners understands the bond between owners and their companies. The business is, in many ways, a personification of their identity and inseparable from the perception of peers, family members, and the community at large.

Letting go of the business—the driving force behind a lifelong symbiosis—requires a radical reframing of an owner’s activity, identity, and purpose. Each of these areas is a critical factor in a satisfactory and successful exit.

For most owners, their identity as a business owner permeates every relationship they have. To family members, they are frequently the success story held up to siblings and their offspring. Because most of their friends are employees, they often hear how “lucky” they are that they don’t have a boss.

In churches, community involvement, and children’s sports activities, they’re often expected to double their contributions both as individuals and because “your company could donate too—it would be good advertising.”

Their business is the context for the vast majority of daily interactions. Its success determines their influence in the community and status among peers. After a transition, owners frequently suffer from a perceived loss of identity. Characterizing themselves merely as “retired” lumps them in with the 96% of people who happily left jobs as soon as they hit a specific age. They rankle at being introduced as a “former owner.” To many, that sounds like people are saying they used to be somebody.

The Advisor’s Role in Planning for the Future

Owners are goal-oriented. They’ve spent an entire career moving toward objectives and setting the next bar to be surmounted. Yet when it comes to transitioning from their businesses, only 17% of owners have written plans—and 48% have no plan at all.

In order for an advisor’s exit planning assistance to be considered successful, the client must be moving on to something he or she anticipates and appreciates more than continuing to run the business. They must find activities to replace the scores of little dopamine hits that occur every time they make a decision. They should carefully consider how to fill their 40-, 50-, or even 60-hour workweeks with activities they find engaging and rewarding. The sense of purpose that owners derive from developing and training people, creating new strategies, and coordinating the different efforts of employees needs to be replaced by other equally rewarding activities. We should be asking purpose-driven questions to clarify their goals and future vision, and helping them set realistic expectations for the timing, value, and their readiness to engage in a fulfilling future.

As advisors, we have an obligation to help business owners understand that exiting their business is not only the largest liquidity event of a lifetime, but also the most dramatic shift in their activities and identity. Doing it right will determine whether they are fulfilled in their next act—or if the exit planning industry continues its dismal record of unhappy customers.

Understanding Holistic Planning – Upcoming Webinar

At ExitMap, we have always considered our mission to help advisors understand the connection between the financial, business, and personal aspects of a successful business transition.

To further that mission, we are introducing a new webinar for business owners:
“Avoiding the 75% – Post-Exit Regret Among Business Owners”
on Thursday, August 28 at 3:00 CDT

The webinar contains considerable additional detail about planning for post-exit success and is appropriate for sharing with clients, prospects, and business groups.

Everyone who registers will receive a recording of the webinar. ExitMap subscribers will also have access to the presentation slides in an editable format.

We encourage you to register and contribute to eliminating the 3 out of 4 exit planning clients who are unhappy with the results of their transitions.