What percentage of an owner's wealth is typically locked in their business?

The statement that 80-90% of an owner's wealth is typically locked in their business is supported by the understanding of how many business owners allocate their financial resources. Many entrepreneurs invest a significant portion of their personal wealth into their business, often making it the primary asset for financial security and retirement planning. This high concentration of wealth in a single asset can create vulnerabilities when it comes to liquidity and risk management, especially if the business faces market fluctuations or operational challenges.

Furthermore, this phenomenon stems from the emphasis on business growth and investment in operations, often at the expense of diversification. The substantial percentage reflects that many owners do not fully leverage alternative investment opportunities, leading to a scenario where their personal financial stability is closely tied to the performance of their enterprise. Recognizing this concentration is crucial in exit planning, as it highlights the need for strategies that allow business owners to realize their wealth without jeopardizing the viability of their business.

Consequently, understanding the weight of this percentage can drive discussions around preparing for a successful business exit and ensuring that owners have structured their affairs to manage this concentration effectively when planning transitions out of their business.