I think the media missed a big business trend. From what I can see as someone who sold an employee benefits business in Portland, Oregon, the trend is that most small-business owners do not sell. Their businesses cease when they no longer work — whether they stop working by design or because it was dictated by circumstance. Instead, their business that they’ve poured everything into fades away. Is it that their business model was flawed? Was their niche destroyed by robo-advisors? I think it’s none of that.
To understand the why of this, let’s understand who we are talking about.
Why entrepreneurs have different mindsets from business owners
An entrepreneur is someone who starts and risks a great deal to get a business off the ground. At least that’s the classic definition. After the business is off the ground, is the owner still an entrepreneur? No, not really. Start-up risks are minimal after a business is established (though of course no business is risk-free). After it’s well established, however, the risks are more macro instead of micro.
What then is this person if not an entrepreneur? A business owner? An executive? A manager? A leader? All of those. A business owner maintains the business, employs people and grows the business well after the start-up phase.
After the entrepreneurial phase, we are talking about established business owners. When you’re a business owner, you need to eventually find a way to sell the business and pass it on. Statistics show that almost none sell. To anyone.
That is a huge business trend.
Why do we so rarely hear about small businesses not transitioning?
Small, privately owned businesses aren’t something the press is made aware of. Owners certainly aren’t going to advertise they didn’t pull off a sale. They’re going to quietly go away. Liquidate is what so many of their advisors recommend.
That is depressing, but it doesn’t have to be. It could shift into one of the great stories of our time. This is where MDRT members and other financial advisors come into play.
The statistics and stories could change and instead reflect happy former business owners passing the baton and carrying it forward. The story could be about former owners retiring with dignity and new owners living the lifestyle of an owner.
In upcoming MDRT Blog posts, I’ll talk more about how I think we can change the statistics and the lives of the people behind it.
William J. Heestand, CLU, of Austin, Texas, is a past MDRT member and Top of the Table qualifier who successfully transitioned a family-owned business four times. He retired in 2017. His recent book, “The Ownership Ladder,” helps potential intrapreneurs achieve the life they dream about while their owner boss gets what they want.
Connect with him on LinkedIn. Read his story “Taking over your family business isn’t always easy,” and read more about business transitioning in his blog post “How to underwrite your future.”
For more about transitioning a business
- Read “What successors need to know”
- Read “Know your practice’s worth”
- Watch “Acquire a practice and create a legacy”
- Read the “Business Continuity Decision Tree“