Business owners failing to recognise the value of an exit strategy puts the future of small business at risk!
More than two million small businesses employ around 60 per cent of Australia’s total workforce.
However evidence suggests that most business owners are under-prepared to deal properly with their succession transitions.
With an estimated one in four small businesses without a formal succession planning strategy, this is of particular concern given the high proportion of workforce expected to retire in the next 5-10 years.
One second tier accounting firm has gone so far as to identify that, over the next ten years, there will be something like 500,000 business owners looking to transfer $1.6 trillion worth of wealth – yet only 36 per cent of these businesses have a succession plan in place.
Proper succession planning needn’t be exhaustive or even labour-intensive. It’s never too early for a business to start working on its succession; even the newest start-up should map out where it expects to be at each phase of its lifecycle, including when finally exiting the business.
Many small business owners ignore the fact it’s not just about transferring the sale but also the leadership, which is intangible and often tricky to define or quantify. Another common issue with succession planning is when family-run businesses approach the exit phase.
However your business is set up, the financial needs of all parties need to be understood with succession transition treated as a business transaction, including shareholder agreements, insurances and transfer documentation required at the exit phase.
All strategies should include relatively basic business information – a current valuation, tax structuring, and compliance issues – with any additional assistance dependent on the size and nature of the business in question.
No wonder it can seem like a daunting process for many owners who have steadily built their businesses.
However investing time and energy into proper succession planning can ensure current and future owners recognise the true value of the business. Call OBT’S friendly Business Solutions team in Gatton on 5462 2277 to find out how.