San Diego Business Owner Readiness 2017

For business owners who have spent their lives building a business and watching it grow, preparing to sell can be a difficult and emotional process—but it doesn’t have to be. Throughout my thirty-year career, I have seen how proper planning can ease such a transition. Without the right guidance, however, many business owners may experience gaps in their plans that can have long-term consequences for themselves, their families, their employees and even their communities. I’ve made it my mission to help business owners avoid those pitfalls, maximize the value of their business, and ensure they are personally and financially prepared for the next chapter of their life.

Since graduating from Northern Arizona University in 1981 I dreamed of returning to the west, where I was fortunate to travel extensively as a Lumberjack football player. In 2013, I finally made it back as one of the founding employees of BNY Mellon Wealth Management’s San Diego region. Since then, I’ve gained a lot of experience and insight about our regional business community and its distinctive character. San Diego is a center of innovation with a culture of collaboration. Proudly, San Diego is the only city in North America recognized by National Geographic and the Brookings Institution as one of the “Global Smart Cities.” San Diego justifiably prides itself on being independent and unique.

It’s fitting then that San Diego has the Advisor of the Year program. Held annually, the program recognizes experts in the range of M&A professions that make business sales successful and provides a way for business owners to connect with the top advisors in San Diego. Such networking promotes further education and open discussion about running a business and the right way to go about transferring the ownership when the time is right. By sharing our insights, we hope to promote an exit planning ecosystem defined as:

“A system, or group of interconnected disciplines formed by interaction of a collaborative, like-minded community of professional advisors with a common goal to grow, preserve and transition wealth for business owners”

In the coming decade, we can expect business transitions to grow steadily; and demand for advisors who have expertise in working with business owners as well. Baby boomers reportedly own over 60% of closely held businesses today, per the Exit Planning Institute. Most of those business owners have a significant portion of their total net worth tied up in their business. So, it’s important that the owners get the maximum return on the sale of their business to meet their future financial goals. That will require a team of knowledgeable advisors to ensure a successful transition.

Yet, the Exit Planning Institute conducted a study suggesting as high as 80% of these companies are not saleable with the team of advisors the owners have in place. Often, as the business owners’ companies grow in size and complexity, their advisors’ skills haven’t kept up and they may not have the knowledge or experience to manage value enhancement, tax preparation, estate planning, cash flow analysis, exit/succession planning or wealth management.

In addition to assembling the right team of advisors long before it’s time to sell, owners need to ensure they work together to avoid offering conflicting advice for the business owner. Naming one primary advisor or firm to take the lead and holding annual team meetings to discuss goals and planning opportunities can ensure they are working together.

It’s clear that insufficient planning can have serious—if not disastrous—consequences. Yet a significant percentage of business owners have little to no exit planning in place, as you will see in this important study on the “State of Owner Readiness.” We hope the findings in this report will prompt you to start to identify ways you can prepare for the transition of your own business someday. The key takeaway here is that it’s never too early to start planning.

David A. Noosinow, CEPA
Senior Wealth Director
BNY Mellon Wealth Management