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Business Succession or Continuation Succession expectations50% of business owners plan to pass their business on to family. 10% anticipate selling to a competitor 30% plan to sell to employees 10% expect to sell to outsiders Succession realities 15% pass to a second generation, and 5% of the second generation businesses pass on to the third. 10% sold to competitors 5% sold to employees 10% sold to outsiders Balance are closed and liquidated A recent survey of more than 5,000 businesses owners revealed that 76% closed their doors in order to “move on” -- only 24% of the businesses succeeded the owner or were sold 100,000 go out of business monthly Why selling a business is difficult and differentConfidentiality must be maintained (Business owners do not want anyone know the business is for sale, but would like to sell it quickly) Buyers don’t know exactly what they are looking for but will recognize it when they see it No one really knows what a business is worth but everyone has an opinion Banks are reluctant to provide acquisition funding Goodwill, a major component of a business' value, is not considered suitable collateral for a loan Future profitability is totally dependent upon new owner, past performance cannot predict future results Most private business owners strive to minimize profits making “real earnings” difficult to discern. Usual buy/sell rules cannot be applied when selling a business A highly charged emotional atmosphere complicates the purchase and sale of smaller businesses The buy or sell decision requires a careful balancing of personal as well as financial considerations Business buyers and sellers are unfamiliar with the unique process employed to safely transfer ownership Advisors of buyers and sellers are often inexperienced in Private company transfers and too often base their advise upon inappropriate Public company protocols There are very few buyers for a business that must be sold Small business overview98% of America’s 9.5 million businesses employ less than 100 people. 90% employ less than 20. 1.5 million Americans operate home based businesses. Small business accounts for all growth of the GNP Responsible for creation of essentially all new jobs Less than 1% are Public companies 160,000 new businesses are created monthly
<30> For additional information contact: Ted Burbank, FIBBA, CBI
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