SUSAN W. SWEETSER
For many years now, women have been a driving force behind the creation of new businesses and jobs. In fact, various studies have shown that female entrepreneurs are creating new businesses at a faster rate than their male counterparts.
However, as many of those women age and approach retirement, they are turning their attention for the first time to the issue of how to exit the businesses they began. What they’re finding out is instructive for those who hope to follow in their footsteps.
In short, it is just as important to plan how to end your business - whether by selling, handing down to a child, or closing - as it is how to start it. That’s one of the key findings of a 2007 study, entitled Exiting Your Business: Serendipity or Strategy, conducted by the Center for Women’s Business Research (CFWBR) and underwritten by Massachusetts Mutual Life Insurance Company (MassMutual).
The study, combined with additional learnings from the 2006 companion report, Exit Strategies of Women and Men Business Owners (also conducted by CFWBR and underwritten by MassMutual), provides rich detail about a burgeoning area of our economy and some important lessons for the women who dream of opening new businesses or who have done so already.
Conventional wisdom was that women were not as prepared as men to leave their businesses. As is often the case, conventional wisdom was wrong.
In fact, the study found that a majority of both men and women do not have any exit strategy. Further, the majority (67 percent) of women and men surveyed had no sales plan in writing, and a large proportion (43 percent) had not conducted a formal valuation of their businesses.
Those numbers point to a huge gap in planning by all business owners, one that has stark implications. When times get hard, those without a plan in place are more likely to close their businesses or settle for less than optimum returns, according to women business owners who found themselves in such circumstances. Women interviewed for the survey who did not have a succession plan could not act quickly enough when markets changed and consequently lost the option of selling. Their only option was to shut their doors. Among those who were able to sell, the most satisfied were the ones who had clear goals and parameters which allowed them to position their companies and choose their strategies accordingly.
Some of the best advice they can now offer other women entrepreneurs the benefit of their experience and insight. The following are among their top recommendations:
- Run your business every day as if it is for sale.
- Be aware of your goals and parameters – know what you will accept in a sale and what’s not okay.
- Don’t let the word get out prematurely to your employees and others that you are considering a sale; often the sales process can take a long time, and until all details are worked out, it is best to not worry your employees. When ready to sell, be very decisive.
- Find a buyer who shares your vision and approach and put many of the conditions of the business and the sale in the sales documents. Get buyers’ promises during the courtship in writing.
- Take care of yourself. Develop an investment and insurance portfolio separate from the business.
Following each of these recommendations can require the involvement of knowledgeable financial services professionals in the business succession planning process. The guidance they provide, along with an attorney and CPA, can be invaluable and can be the difference between a successful exit with a secure retirement and a less-than-optimal exit with an uncertain future.
Nearly 10.4 millions firms are 50 percent or more owned by women, according to the CFWBR’s Key Facts about Women-Owned Businesses (2007). Between 1997 and 2006, majority women-owned firms grew at twice the rate of all firms (42 percent vs. 24 percent), according to the same report.
With women creating such tremendous wealth, both for themselves and, potentially, for their heirs, it is critical that they begin thinking about and preparing for their eventual departure from their businesses. Ensuring that they can enjoy the benefits of their entrepreneurial spirit and acumen takes hard work, foresight and planning. But those are three qualities that are never in short supply for women entrepreneurs.
Susan W. Sweetser, JD, MBA, CFP, CLU, ChFC, is vice president ,agency marketing, of the U.S. Insurance Group of Massachusetts Mutual Life Insurance Company, Springfield, Mass. She is a member of the New York and Vermont Bar Associations, an adjunct professor of Business Law at St. Michael’s College and a former two-term Vermont State Senator. She was Working Mother Magazine’s 1998 national working mother of the year. She can be reached at firstname.lastname@example.org