Millennials often disrupt conventional wisdom, but when it comes to succession planning, it seems millennial business owners go by the book.
That’s because business owners in their 20s and 30s are almost twice as likely to have a succession plan (61%) compared to baby boomers (32%) and gen-Xers (also 32%), reveals a U.S. survey by insurer Nationwide, released earlier this year.
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“My assumption is that baby boomers believe they’ll work in their current position, driving the company’s success until they retire, while millennials hope to run multiple companies and show how they’ve successfully positioned the company before they leave,” says Kirt Walker, president and COO of Nationwide Financial, in a release.
Read: More to millennials than you think
Overall in the U.S., three in five small businesses are without a business succession plan, finds the survey. Almost half of business owners without a plan think it’s unnecessary (47%). Only 40% have discussed succession planning with a financial advisor.
Read: Create a stronger succession plan
Business for sale
But putting off planning has consequences.
For example, for clients who end up selling, preparing a business for sale is a lot like getting ready to put a house on the market: would-be buyers might not like what they see when they start looking closely.
“There might be a price on the table contingent on due diligence, and then things start popping up,” Karen Reynolds Sharkey, a business strategy executive with financial services company U.S. Trust, tells the Associated Press. “Deals do get renegotiated and prices can fall.”
Potential issues: too much revenue comes from one product or a small number of clients. Or there could be environmental restrictions or violations on the property.
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Harris Kaplan learned the consequences of putting off planning when he decided to sell his market research and consulting company in 1992, he tells the Associated Press. It took about four years to get the business in a position to be attractive to buyers. When he started a new company, he created a board of directors to advise him and review his decisions.
“I said, ‘We’re going to run it as a saleable business from the get-go,” Kaplan says.
And advisors shouldn’t forget about their own succession planning. In its annual compliance summary, the OSC notes that one-person firms are particularly at risk without a succession plan.
Read: Are you making these common compliance mistakes?
About the survey: The small business owner survey was conducted online by Harris Poll on behalf of Nationwide from June 10 to June 23, 2016. Respondents comprised 502 U.S. small business owners of companies with fewer than 300 employees, and included 190 millennials (ages 18 to 35), 152 gen-Xers (ages 36 to 50) and 106 baby boomers (ages 51 to 65). Results are weighted to be representative of small business owners in the U.S.