“Preparing For Your Eventual Exit” | Advanced Grower Solutions
Earlier this year, PivotPoint Business Solutions, in collaboration with Greenhouse Grower, BEST Human Capital and Advisory Group, and Advanced Grower Solutions, conducted the first-ever “State of Succession and Exit Planning in the Horticulture Industry” survey. This survey provides a comprehensive look at how horticulture business owners are preparing for their eventual exits, addressing previously underexplored areas, and offering valuable insights into business attractiveness, owner financial preparedness, and owner readiness.
According to the Small Business Administration, 10 million Baby Boomer-owned businesses will change hands or shut down in the next decade due to a lack of buyers. Even when there is a willing buyer, the Exit Planning Institute estimates that 80% of businesses are unprepared for sale, leaving buyers uncomfortable closing the deal.
The survey identified 10 key themes that, if implemented, can prepare the business for transition and make the business highly desirable to potential buyers generating the highest return for the owner.
1. You Must Have an Exit Plan
32% of survey respondents do not have an exit plan. Among those who want to exit within two years, 55% have yet to start planning. Early planning is crucial, as it takes three to five years to build and execute an exit plan to maximize value and return. This allows for a structured and thoughtful approach, reducing the risk of last-minute decisions that could negatively impact business value. Being prepared at all times also prepares owners for the positive outcome of an unsolicited offer from a third-party buyer and the not-so-positive outcome of forced exit due to death, disability, divorce, disagreement between owners, or business distress.
2. Exit Planning Is a Team Sport
Only 33% of our respondents are working with advisors to prepare for their exit. While, as the owner, you are the center of the exit plan, the endeavor is so varied that you cannot manage it on your own. Exit planning requires diverse perspectives from multiple stakeholders and specialists, including external trusted advisors, management, and family members. You need a team to provide expertise in different areas crucial to your exit, help manage the process, and ensure a smooth transition.
3. Communication Is Key
80% of survey respondents who plan to exit in less than 2 years have shared at least part of their plan with their management team. Regularly discussing plans with key stakeholders including family members, employees, and potential successors, ensures everyone is on the same page, prevents misunderstandings, and keeps everyone aligned with the business goals and transition timeline. Intentional communication about your eventual exit will also allay employee fears and mitigate defections when the time does come.
4. Prioritize Personal Financial Readiness
Many business owners are facing financial uncertainty with respondents rating their financial readiness a 58 out of 100. Additionally, nearly 70% of owners are unsure of their after-tax, post-transition income needs and haven’t conducted a formal business valuation. Knowing what your business is worth and your post-sale financial needs is essential for creating a solid financial future. We consider 80 out of 100 the beginning of the range for success in your personal financial plan. If you’re below that level, a financial planner needs to be added to your team of advisors. Financial readiness involves understanding your personal financial goals, assessing your retirement needs, and ensuring you have adequate resources to support your desired lifestyle after the business transition.
5. Your Spouse Is Not Your Trusted Exit Advisor
When asked, “Who is your most trusted advisor,” most survey respondents let us know it is their spouse. That’s wonderful in life if for no other reason than for domestic tranquility! However, specialists outside the family need to guide the exit planning process. Key advisors include an exit planner, personal financial planner, CPA, and business attorney. These professionals provide a holistic perspective that leads to the best outcome. External advisors can offer objective insights and ensure that all aspects of the transition, including legal, financial, and operational considerations, are thoroughly addressed.
6. It’s All in the Name
For 34% of our respondents, the family name is part of their business name, but 76% do not have family interested in taking over the business. Our industry has a far larger percentage of multi-generation owners than average. This contributes to the reputation for which horticulture operations have come to be known – hard-working, proud owners, great businesses where employees are treated like family. A gradual transition to a new company name years ahead of the anticipated transaction can help make the business more attractive to external buyers by reducing perceived dependencies on the family identity.
For the rest of the steps and additional information on exit and succession planning insights from the “State of Succession and Exit Planning in the Horticulture Industry” survey, please read the original article on the Advanced Grower Solutions website, and check out the company’s blog for more business-minded tips and tricks for greenhouse growers.
