Jared Friar, Business Advisor – CEPA
I recently made a significant career change, shifting from a major, global, multi-billion dollar corporation to a role as an Advisor with Calder Capital. Why? Because I am passionate about problem-solving and I like to be hands-on in my work, believing that collaboration is absolutely essential to any well-formed strategy. Contributing to tangible, positive change in the lives of others is hugely rewarding for me, and it felt as if this priority was getting further away from me. Working with small to mid-sized business owners is the perfect place to leverage my strengths and passions. Making a positive difference in the lives of just some of the millions of business owners across the US is a huge incentive!
Before making this change, it felt like there were hundreds of considerations to make. How would this impact my family? My finances? My long-term career goals? Things you tend to not think about when life is on cruise control, and then suddenly you’re forced to make a decision. Most of us have been in a similar situation, and likely look back with some angst about not planning better for the future. My personal experience has many parallels to that of a business owner looking to make a change, and when I was in the middle of making this life-altering decision, I sought out as much input and guidance I could from the people I trust the most. These conversations gave me what I needed to know that the leap I was making was the right one for both the immediate and long-term future of both myself and my family.
As part of this new journey with Calder Capital, I was able to go through the process of obtaining my Certified Exit Planning Advisor (CEPA) credential via the Exit Planning Institute (EPI). The EPI is a professional organization focused on working with business owners to align the “3 legs of the stool” – personal, business, and financial planning.
The EPI publishes a “State of Owner Readiness” report, with the 2023 version coming out recently. Here is a link to the report (note that you will need to share an email address to open). This is a robust report that surveys 1,100+ privately owned businesses across the US on a number of topics related to owner exit planning, readiness to transition, and various demographic information. The report itself is absolutely worth the read, as there are a number of powerful takeaways. Some of the most eye-catching highlights include:
75% of surveyed business owners want to exit in the next 10 years, and 69% say that exit strategy is a priority.
Extrapolate that to all private business owners across the country and this represents around 4.5 million businesses that could undergo some form of transition by 2034! A couple more impactful statistics that tie directly into an owner’s potential exit:
- Business size does not matter when it comes to the importance of planning. 35% of survey respondents had businesses with $5 million or less in annual revenue.
Source: EPI 2023 National State of Owner Readiness Report
- According to a report shared by EPI, 76% of business owners regret selling their business just 1 year later. Why? Of the survey respondents, 60% of them stated they had no formal personal plan for what would come next after their business transitioned. Personal planning is often neglected when looking to maximize business value, but lack of personal planning can lead to a sizable void in one’s life when the business transition is complete.
The profile of a business owner is changing – mostly by getting younger and more educated.
Source: EPI 2023 National State of Owner Readiness Report
Source: EPI 2023 National State of Owner Readiness Report
Baby Boomers went from accounting for 73% of surveyed business owners in 2013 to just 19% in 2023. Gen X is now the predominant generation of private business owners, going from 20% in 2013 to 39% in 2023. Over this same 10-year period, Millennials jumped from 2% to 21% while Gen Z entered the mix and accounted for 20% of surveyed private business owners. This in itself does not mean much, but this shift shows a greater impact when connecting to exit planning. Younger owners show a stronger inclination to plan and pursue additional education.
- From 2013 to 2023, the percentage of owners surveyed who claimed they are aware of their exit options grew from 34% in 2013 to 70% in 2023.
- Over this same period, the percentage of owners surveyed that have sought outside advice around exit planning grew from 38% in 2013 to 68% in 2023.
Education around the need for exit planning has grown in availability, and business owners have clearly found benefits. The EPI states that approximately 80% of an owner’s net worth is tied to their business. Having an exit strategy is an essential piece of risk mitigation.
Business owners have re-prioritized their core team of advisors and become more proactive in their exit planning efforts.
In 2013:
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Accountant
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Peer Group
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Spouse
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Attorney
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Financial Advisor
Source: EPI 2023 National State of Owner Readiness Report
In 2023:
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Financial Advisor
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Attorney
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Accountant
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Spouse
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Banker
Source: EPI 2023 National State of Owner Readiness Report
Take a look at how the landscape of a business owner’s top 5 advisors has shifted from 2013 to 2023:
- Financial advisors went from #5 to #1
- Attorneys went from #4 to #2
- Peer Groups went from #2 to unranked
This isn’t a slight at any one profession (or your friends). This is indicative of the value of having a team of professional, trusted advisors to offer their expertise along the way. No single person can be an expert at all things that go into any kind of business transition or sale. Another statistic showing the changing landscape around the value of holistic planning? According to the 2023 survey, 62% of business owners have completed some kind of pre-transition valuation exercise, up from 14% in 2013. Being intentional in your planning efforts helps prevent the dreaded unforeseen event that can derail an otherwise well-crafted exit strategy.
When thinking about transitioning, it is easy to focus solely on the attractiveness of your business and push your personal needs aside. Readiness to transition is not the same thing as the attractiveness of your business, and this isn’t just in the eye of the owner. A potential buyer’s view on the readiness of the business is equally important, as there could be red flags that arise and create pause. The State of Owner Readiness Report does a great job detailing what “readiness” truly means.
Wherever you may be in your ownership journey, please do not hesitate to reach out.
About Calder Capital
Calder Capital, LLC is a lower middle market investment bank providing mergers and acquisitions advisory services to business owners, entrepreneurs, family offices, and investors across the United States. Our dedicated team of professionals combines extensive industry experience, technological innovation, negotiation savvy, and key relationships to exhibit exceptional execution. Calder’s services include mergers and acquisitions advisory, private funds and capital markets advisory, and business valuations.