Business owners face bleak retirements without succession plans
Owners of small to medium-sized enterprises (SMEs) are being urged to seek financial advice to develop an exit plan or face a bleak retirement.
Family Business Consultants Network (FBCN) chairman, Jon Kenfield, warned that the failure of industry associations to assist business owners to develop appropriate succession plans was a “ticking time-bomb” for the future of the enterprises and the retirements of their owners.
Kenfield said surveys had showed that less than one in four SME owners had a formal succession plan or transition strategy in place.
“This is despite the fact that most owner need to transition profitably out of their businesses to fund their retirements – whether through family succession, sale to management and staff, or some other form of disposal,” he said.
“Many business owners who trusted to markets and luck have already discovered, to their cost, that failing to make the right plans and arrangements in good time leaves them vulnerable to issues such as: (a) there are many more sellers than buyers in the market; (b) access to capital remains difficult for smaller businesses and (c) the only hungry buyers out there are ‘hoovering’ consolidators.
“The unfortunate consequences may include having to dispose of assets at fire sale prices, or having to close the doors and walk away with little more than memories from a lifetime of hard work.”
Kenfield added that owners often reduced investment in the business to get more money out for themselves while they still can, at the expense of the value and viability of the business itself.
He said the broader economic impact was chilling, with many owners unable to adequately fund their retirements, and recommended that organisation could take advantage of planning programs to help their members prepare for retirement.
“White label, industry specific succession planning advisory services and programs as a ‘value add’ benefit to members, and as a strategy for their own survival,” he said.
“An interesting component of these programs is the involvement of members who have successfully exited their own businesses, who are willing to act as mentors throughout the process.”
AUTHOR
Nicholas O'Donoghue
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