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Know how: Nearly 60 percent of business owners lack transition plan

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A new survey from Wilmington Trust and a team of academic advisors found that 58 percent of owners of privately held businesses lack a transition plan despite financial risks of not planning. The research, titled “The Power of Planning,” surveyed more than 200 owners of privately held companies about their plans and goals for transitioning their business.

According to the research, the top reason for business owners delaying transition planning was their passion for the day-to-day logistics involved in running their companies. Seventy-eight percent 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. Further, 42 percent responded they were too busy to start planning, while 44 percent 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.

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. In fact, early planning can provide more flexibility and allow owners to continue to work in whatever capacity they choose — before and after a transition.

Surprisingly, 47 percent of respondents ages 65 or older still do not have a transition plan in place. Yet 67 percent of respondents said getting older is the top reason for creating a plan, followed by providing security for their family (55 percent).

The survey results show that business owners have both a professional and emotional connection to their companies, and a sense of personal responsibility that extends beyond the company to employees and customers. The two most important transition goals cited by survey respondents were “ensuring the company remains viable in the long-run” and “taking care of employees,” both cited by 87 percent of respondents.

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