The widespread lack of succession or exit plans in SMEs is a “ticking time bomb” that threatens the future of small business, warns one business consultancy.
Jon Kenfield, chair of the Family Business Consultants Network (FBCN) says if businesses don’t develop a plan to successfully transition their businesses to the next generation, then it may retire with them.
“Surveys, experience and industry reports estimate that the average age of Australia’s SME owners and leaders is 60+ and that an alarming 76% don’t have formal succession plans or transition strategies in place to ensure business continuity. And this is despite the fact that most owners 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.
Kenfield says it could result in many Australian business owners not being able to adequately fund their retirements or closing the doors on their business altogether.
Australian Broker spoke with Tim Brown, CEO of Vow Financial, who says it is about developing a solid business plan early on their business, so when the time comes to retire they will be able to sell their business easily and for a good price.
“Businesses that have a vision, mission and objectives, supported by an appropriate business plan for implementation and managing of income and expenses will always sell for more. A potential buyer can see what they are buying and how the business is progressing against plan. They will know if they adopt the same business plan they will also succeed. A good business is a business that can survive without the owner, it generally has good staff, good systems and processes and loyal clients.”
Zarko Jokic, business development executive for Loan Market in NSW also told Australian Broker it is critical that brokers running their own businesses develop the proper infrastructure early on.
“Brokers need to look at how their business can grow at the same pace without them necessarily driving everything and that’s where infrastructure comes in. Loan Market advocates growth through infrastructure. We do a lot of work around business planning to work out where the efficiencies and inefficiencies are in a broker’s business and what benefits they will achieve by growth through that infrastructure.
“For example, we can help a business hire loan writers who are new to industry so they don’t have to do all the recruiting and training all by themselves. This is developing proper infrastructure so that in ‘x’ amount of years, they can step back and the next person can step up and everything will continue to run smoothly.”