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Exit on the horizon: Setting up for success

By Russell Prior & Dan Peters

There is always a lot of conversation about starting a business – the ‘start-up’. However, there is less discussion about what happens at the other end.

In our 2023 Global Entrepreneurial Wealth Report we asked 848 current entrepreneurs about their intentions around a business exit, and 125 former business owners from across the globe about their actual experience of exiting, either by handing it down or selling it. They tell us that they wish they had consulted more with their families, understood the value of their company better, and started business and personal wealth preparations sooner*.

Their guidance to current entrepreneurs considering the sale or transfer of a business would be to avoid the mistakes they made by fully understanding the exit or transition process, and to start planning as early as possible.

What former entrepreneurs feel they could have done differently or better

% of respondents

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What former entrepreneurs feel they could have done differently or better - Graphical Representation

Recommendations for those planning to exit their business (top 3)

% of respondents

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Recommendations for those planning to exit their business (top 3) - Graphical Representation

Understand your exit route

Exiting a business is a significant decision for any founder and it's not just about extracting liquidity or getting the best price. It's about finding the right buyer. You may be looking for someone who can nurture the business; someone to expand and grow it; or even a buyer who you believe can help you to leave a positive and lasting legacy. For those contemplating a transfer to the next generation, it's about assessing their readiness, interest and means to continue the journey.

We spoke to current entrepreneurs across the globe to understand their plans around business exit and wealth transfer. Over a third (34%) are considering exiting in the next 5 years, and this is closer to half in some markets, such as Hong Kong (45%) and India (44%).

Transferring ownership within the family is the most common route to exit, with 51% planning to transfer to the next generation or another family member. Over a third (34%) are planning to sell to a third party, but that is split between those looking to sell to management or employees (6%), those seeking a partial sale (13%) and an outright sale (15%). A further 15% are still undecided.

For those planning to sell, finding a suitable buyer is their top priority. But it’s also clear that entrepreneurs have other, more personal, signposts for knowing when the time is right – such as no longer enjoying their role or reaching a certain age. For those planning to transfer, they are focused on readiness of the next generation (70%).

Proximity to exit

% of respondents

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Proximity to exit - Graphical Representation

Plans to exit, leave or hand down a business

% of respondents

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Plans to exit, leave or hand down a business - Graphical Representation

Prompt to exit for those intending to sell

% of respondents (n=287)

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Prompt to exit for those intending to sell - Graphical Representation

Fail to plan, plan to fail

Understanding how – and when – you want to exit your business can help ensure the best outcome but, critically, can also help you to smooth the process along the way. Often, entrepreneurs are focused on the day to day running of the business, and finding time to sit down and think about that next chapter may not be a priority. But the earlier you start preparing for an exit, the better prepared you’ll be when it arrives.

It’s interesting to see just how much entrepreneurs are talking about the personal aspects of an exit, and the need to make sure this is part of the preparation. Over half of the entrepreneurs we talked to told us that ensuring family wellbeing is a key consideration when it comes to personal preparation for exit. But they are also making more formal preparations, with 33% starting and 29% expanding a relationship with a private bank/wealth manager. This can also support in planning how to save or invest in financial markets, which 30% of those exiting within 5yrs are doing. Making plans for your personal wealth ahead of time will ensure you make the most of the options available to you and your family.

The exit of a business is likely to have an impact on your family too. If family members are involved in the business – either directly through company roles or as shareholders – then they are likely to be involved in the decision-making process. Conversations ahead of time can help keep everyone on the same page. 

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Impact to family - Graphical Representation

Personal preparation for those planning to exit within 5 years

% of respondents

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Personal preparation for those planning to exit within 5 years - Graphical Representation

Even when families aren’t involved in the business, there may still be a substantial change following an exit – whether that’s in terms of your personal wealth or even how you plan to spend your time. These can impact family dynamics so having open and honest conversations about what’s ahead will help everyone’s transition. 

Interestingly, 38% have already started transferring personal wealth to their family in some way, but 64% of entrepreneurs do not appear to be discussing their wealth transfer plans with their family. One in ten (11%) have no plans around transferring their wealth, which jumps to 24% for those with investible assets of $20-$100m+.

Sometimes the opportunity to sell can come about at an unexpected time, often when an attractive offer arises or from a change in personal situation. While you cannot always plan for this, you can prepare effectively in advance – from a professional and personal perspective – to capitalise on any opportunities when they do arise and manage any unforeseen risks.

Your next chapter

Leaving your business can be an opportunity to embark on the next phase of an enterprise, generate liquidity or take a step in a new direction. When a business has been such a central focus point of your life and often that of your family, letting go can be especially challenging. And while entrepreneurs at this point may be focused on the exit of their business, often they have spent less time thinking about how they plan to manage, invest or even distribute the proceeds of the sale until after the event. 

Over half (53%) of these entrepreneurs plan to stay in business in one way or another – whether that’s starting, investing or taking a leading role in a business, or even acting as a mentor. But there are other avenues too, such as focusing on philanthropic causes or even pursuing personal interests. 

Don’t wait until after an exit to start thinking about your other business interests, hobbies or even passion projects. Often there’s a sense of loss after the sale or transfer of a company, so having something to jump into can be a welcome distraction. The support of your family is crucial at this time, so involving them at the planning stage means they’ll be aware of what’s to come – meaning they can be on hand to help you enjoy your next chapter.

Ambitions and goals once exited

% of respondents

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Ambitions and goals once exited - Graphical Representation

Conclusion

It’s clear that entrepreneurs need co-ordinated support across both their professional and personal lives to support their ambitions with business exits, wealth transfer and the personal transition that goes with this. Clear objectives, planning and preparation are key for all three.

While long-term plans may well change over time, having clear transition and post–exit plans can remove uncertainty and complexity, allowing you to make the most of your next chapter.

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*We surveyed 973 entrepreneurs across 9 markets with investible assets of USD2-100m+ to understand their priorities, concerns and plans in three key areas: international opportunities, the path to business exit and beyond, and the transfer of wealth through generations. This includes 95 UHNW individuals with investible assets of USD20-100m+.

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