Overview:
Exit methods are sometimes missed by small enterprise house owners, however planning forward ensures a clean transition, preserves jobs, and creates wealth-building alternatives. JPMorgan Chase outlines steps each entrepreneur ought to contemplate for long-term success.
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In the event you’re at first phases of launching your small enterprise or just some years into possession, you may not be serious about exit plans. Getting ready for an possession transition, nevertheless, is a crucial a part of each entrepreneur’s journey.
Not solely is a transition plan necessary in your monetary future, a profitable transition plan additionally retains companies in communities, preserves jobs, diversifies possession and creates wealth-building alternatives for present and new house owners. With out a plan, house owners threat dropping the legacy they’ve constructed, and communities can lose very important native companies that help jobs and financial exercise
Why transition plans are necessary
Seventy-five percent of owners stated they’d prefer to exit their enterprise inside the subsequent decade, with 58% of homeowners missing a proper transition plan based on Challenge Fairness. In New York, that transition is already properly underway as 50% of companies are owned by people 55+ and older.
Choices for transition
Understanding the choices obtainable in any possession transition is crucial to creating the proper plan. Good succession choices can embody:
- Intergenerational transfers: Passing on a enterprise to heirs or relations.
- Mergers and acquisitions: Promoting to a different agency or entrepreneur.
- Worker possession: Transitioning possession to workers, equivalent to via an Worker Inventory Possession Plan (ESOP).
Whereas many small enterprise house owners may dream of leaving their corporations to their kids or different relations, solely 30% of household companies survive the transition from first-to-second era possession. That is why it’s necessary to contemplate all choices.
For some, an worker possession transition can set up a legacy, enhance agency outcomes, and create shared wealth-building alternatives. For others, promoting to a non-public fairness firm or a competitor might take advantage of sense in your state of affairs.
Discover help in your transition
Irrespective of the timing or construction of your exit plan, your monetary establishment can present entry to strategic advisors, financing and connections to consumers and sellers at each stage of your journey.
The guidelines beneath may also help enterprise house owners establish their long-term targets and information them via the selections concerned in any proprietor transition course of.
- Perceive choices: Assessing possession transition choices – together with intergenerational transfers, mergers and acquisitions and worker transactions – is step one in creating the perfect plan to fulfill your targets and lead to a sustainable future for the enterprise.
- Anticipate change: Possession transitions can have a major affect on a enterprise proprietor’s private stability sheet, household and monetary well being. Having clear targets for what a profitable enterprise succession seems to be like—and what life takes care of an possession transition, together with near- and short-term bills—is crucial.
- Choose advisors fastidiously: Assembling a group of trusted advisors could make the method simpler and guarantee all events are aligned and centered on long-term success. Advisors can embody accountants, enterprise brokers, mergers and acquisition advisors, valuation consultants, attorneys and bankers.
The underside line
Planning for an possession transition must be a normal a part of each proprietor’s marketing strategy, regardless of the stage of your entrepreneurship journey. As you proceed to develop and scale your online business, it’s necessary to know the choices obtainable for the longer term success of your online business—and to take motion early to safe your legacy.
For extra small enterprise monetary well being suggestions, go to chase.com/business.
For informational/instructional functions solely: Views and methods described on this text or offered by way of hyperlinks is probably not applicable for everybody and aren’t supposed as particular recommendation/advice for any enterprise. Data has been obtained from sources believed to be dependable, however JPMorgan Chase & Co. or its associates and/or subsidiaries don’t warrant its completeness or accuracy. The fabric is just not supposed to offer authorized, tax, or monetary recommendation or to point the supply or suitability of any JPMorgan Chase Financial institution, N.A. services or products. It is best to fastidiously contemplate your wants and goals earlier than making any selections and seek the advice of the suitable skilled(s). Outlooks and previous efficiency aren’t ensures of future outcomes. JPMorgan Chase & Co. and its associates aren’t answerable for, and don’t present or endorse third social gathering merchandise, providers, or different content material. Deposit merchandise offered JPMorgan Chase Financial institution, N.A. Member FDIC. Equal Alternative Lender. © 2025 JPMorgan Chase & Co.