Adding Value With Exit Strategy Planning for Small Business Owners

The financial services industry is primed for the seismic generational wealth transfer set to occur over the next 25 years. However, some staggering statistics indicate a less publicized wealth transition looming among U.S. business owners. 

Small business owners—accounting for 99.9% of the businesses in the U.S.¹—represent a significant opportunity for financial professionals during this massive transfer of wealth.

According to the Exit Planning Institute’s 2023 National State of Owner Readiness Report, 70% of business owners indicated knowledge of their exit options. This increasing familiarity with business exit planning principles is due, in part, to financial advisors working to engage, educate, and support their business owner clients. In fact, financial advisors took the top spot as “most trusted advisor” among the surveyed business owners—a noticeable increase from the fifth spot in 2013. 

Increased trust and reliance on financial professionals may explain why 58% of business owners have a documented exit strategy prepared or reviewed by a financial advisor. However, the inverse reveals that 42% of business owners have yet to take such steps, highlighting a significant opportunity for financial professionals. 

With 51% of privately held businesses owned by baby boomers, age is another factor contributing to increased awareness of exit planning. By the end of 2024, the youngest boomers will turn 60, and the average age for a business owner will be 67—shifting more owners into the traditional retirement age range.

Yet, while “full retirement” was the number one response owners gave when asked to describe their post-exit plans, only 14% of baby boomers named exit strategy planning as a top priority, citing lack of time as the primary reason. When you consider that 70% of owners also reported having no formal estate plan, the opportunity for professional financial advice is apparent.

In comparison, over 50% of millennial business owners ranked exit planning as their top priority, with most wanting to exit within the next five years. This group is also more likely to buy another business and repeat the process, thus having multiple exits across their business owner career.

Research shows that, over the last decade, establishing an advisory board of professionals has become a common practice among business owners. Fifty-six percent (56%) reported having a trusted group of advisors, in which financial advisors are integral players—often joined by CPAs, attorneys, family members and other business owners.

An effective business exit strategy typically takes three to five years to execute. With $14 trillion of business owner wealth transitioning over the next decade, now is the time to engage owners with a holistic approach—helping them grow value, unlock wealth, ensure alignment of personal goals, and position their business for a successful transition. Try leveraging this approach with your existing business owner clients and consider pursuing new opportunities with prospective business owners. There are plenty of them that need your expertise.