SMEs failing to plan for exit, retirement

The bulk of SME operators are failing to develop and implement an exit strategy, new research has found.

The bulk of SME operators are failing to develop and implement an exit strategy, new research has found.

While the lack of succession and retirement plans can have significant impacts on a business, such as affecting the value of the business or delaying a transition, the latest Voice of Australia Business Survey shows just 19 per cent of Australian SMEs have such a strategy in place.

“Succession planning should be part and parcel of any solid business plan, for even the smallest businesses,” said Edi Carlesso, director of Business Advisory Services at Bentleys South Australia, which conducted the survey.

“Our survey showed that a majority of SME owners intended for their business to continue without them, with only 12 per cent of those surveyed intending on liquidating or closing down their business upon exit.

“Though these findings are hopeful in terms of small business viability, the lack of formal succession planning is a cause for concern, especially as SMEs make up 96 per cent of all businesses in the country, collectively employing 4.5 million people and contributing $330 billion to Australia’s economic output.”

The national survey of SMEs revealed that 25 per cent of owners who plan on exiting their business within the next five years had never considered the need for a succession plan. For those that are not planning an exit in the next five years, this figure rose to 30 per cent.

By comparison, the majority of SMEs (57 per cent) have a retirement strategy in place, although this too leaves the remaining 43 per cent of businesses exposed.

“We have all heard the saying that failing to plan is planning to fail – unfortunately the reality of this can be devastating for a small business and its owners. Having a succession and retirement plan however can provide peace of mind and it need not be an onerous process,” Mr Calesso said.

“By putting a little bit of time and effort in early to set these up, you can avoid hours of stress and complications later in life.”

According to the survey, SME operators have a raft of reasons for not implementing plans for the future.

As many as 30 per cent believe their business is not complex enough to require such planning, while a similar number admit that they simply have never considered it.

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