Slightly more than 40 percent of marine industry companies currently have a succession plan or exit strategy in place for their businesses.
And when it comes to identifying a target date to transitioning ownership, more than a third of those businesses are looking ahead three to five years.
That’s according to the latest survey of Boating Industry print and digital subscribers, conducted by email in October. Respondents were a mix of boat dealers, manufacturers, marina owners, industry suppliers and others working in the industry.
While 43 percent of readers reported having a current plan in place, that puts the industry well ahead of most family-owned small businesses. According to the 2017 Family Business Survey from PwC, only 23 percent of family firms have a succession plan in place.
Entrepreneurial vision likely started the family business, but it is continued innovation that will help family firms bridge the gap between the current moment and the long-term future, PwC’s family business survey states.
To remain innovative, a company needs to pause and take time to think beyond the immediate demands of the day-to-day and make judgments about what the picture might look like two, five, or 10 years out.
More than 60 percent of the companies surveyed in October are planning an ownership transition in the next one to five years. Boating Industry’s last succession survey in May 2016 reported about half of companies surveyed were planning a sale during the same period.
Family, employees preferred
Many respondents expressed concerns about who the future owners of their businesses will be, noting the increased cost of doing business and higher property values, especially for waterfront dealerships or marinas.
There is also concern about establishing a framework to make the ownership change smooth and maintaining a high level of customer service, and not having to sell when the market is at the bottom.
Of those companies that do have an exit strategy, about half are planning to transition the business to a family member or employee – 33 percent to family and 18 percent to one or more employees. Forty-one percent plan to sell the business to an outside buyer.
Most business experts say companies should spend at least 10 years in the planning process for a succession. It can take many years to understand organizational challenges, identify solutions and then get all the puzzle pieces to fit.
In our survey, the majority of companies have a target date for the transition that is at least three years out, with only 10 percent planning to change ownership in the next year.
Seventeen percent have a goal of more than five years, with 8 percent aiming for more than 10 years from now for the transition.
Of the companies we surveyed, 25 percent reported they had been through an ownership transition in the last 10 years. Of those companies, 78 percent described the transition as very successful and 12 percent said it was somewhat successful. Only 10 percent said it was “neutral” or unsuccessful.
Several companies that reported successful transitions cited support from previous ownership and strength of market as positive factors.
Of those companies that had completed a sale, 33 percent transitioned to family members, 47 percent sold to a third-party buyer and 7 percent had employees take over ownership.
While the horizon for the planned succession for those companies that have a plan was years out for most companies, that wasn’t the case for companies that have had a transition.
Forty-six percent of those companies spent less than five years planning the transition, and 28 percent did it in less than a year. Eighteen percent worked on it for six to 10 years, and 7 percent devoted more than a decade to planning the transition.