Succession Planning and Business Transitions
A very current and relevant article on the issue of Succession Planning and Business Transitions.
With the Baby Boomer generation at retirement age, and a fact base assessment leading to the following …
https://tinyurl.com/y9tklg8q : alexandra frean : The Times, 19th July 2017
“With a wave of baby boomer business owners hitting retirement, the question is becoming particularly pertinent now — but where will the capital come from to acquire the large cohort of private businesses coming on to the market? And who will reel it in?”
“If present trends continue, about 400,000 such companies with directors over the age of 60 can be expected to be wound up in the next five years as the owners retire and are unable to find a buyer for the business. At a conservative estimate, that could result in the loss of two million jobs. It could be twice that many.”
.. there is a definite need in the business world, particularly the SME business sector, to address a problem that has a wide-ranging impact and a deep effect on the near future economy.
One of the traditional routes to exit involves engaging the services a Business Sales Agent or Broker, where they will value the business to hopefully provide the Broker or Agent with the biggest commission fee, the expectations of the vendor are set too high, and the agent may take a fee for advertising the business.
The vendor is then is SELL mode, the business runs down, the turn-over drops, the value diminishes and the business seeps away, with the loss of jobs, loss of value and the loss of the services or product that the business used to deliver.
At any one time there are 1,000’s of business on the market. A quick Google of UK business for sale throws up the following….
- UK Business for Sale : 16,328
- Daltons Business : 26,185
- RightBiz : 23,875
Add in the endless list of local brokers, agents and sector specialists and the number of businesses on the market in the UK is huge. Add in the pending numbers of retirement for the transitional Baby Boomer business, and the numbers are scary. With the recognition that the Baby Boomer business will, if not transitioned or disposed of in a success plan, impact the numbers of unemployed, with subsequent job losses placing a great burden on the welfare system, this is not an insignificant issue.
Add into the mix that fact the following generations tend to be programmed to function in the world with an “accessibility” mind set – as opposed to the “ownership” approach, then who is lining up as viable options to take on the ownership and operation of the growing number of business on the market.
The GenX and Millennials work with Uber as opposed to car ownership, property rental as opposed to home ownership, and whilst there may be arguments on disposable income and cost of such high ticket items leading to the current “access” verse “ ownership”, there still remains a huge gap in relation to the number of businesses hitting the market and a deficit of suitable buyers.
This is not a UK problem, the numbers in the USA are massive, and globally, the Baby Boomer Generation in the industrially advanced regions have a legacy that, in the vast majority of cases, – they cannot give away ! The resulting disappearance of these business in the SME market – a market that provides circa 90% of the GDP
The following is a cut from BUSINESS POPULATION ESTIMATES FOR THE UK AND REGIONS 2015, National Statistics….
There were a record 5.4 million private sector businesses at the start of 2015.
This is an increase of 146,000 since 2014 and 1.9 million more since 2000.
The number of employing businesses increased by 35,000 and the number of non-employing businesses by 112,000, with the annual growth for both groups being around +3%.
SMEs and the Economy
Small businesses accounted for 99.3% of all private sector businesses at the start of 2015 and 99.9% were small or medium-sized (SMEs).
Total employment in SMEs was 15.6 million; 60% of all private sector employment in the UK.
The combined annual turnover of SMEs was £1.8 trillion, 47% of all private sector turnover in the UK.
One statement in the report shows the importance of the SME market
SMEs account for at least 99% of the businesses in every main industry sector
With the inevitable retirement of a major age demographic, with the business owners looking to dispose of the business, this leads to a key question…….
What’s the plan and how do we fix it, – for both the business owners that have created the wealth and value and also the economy – where the resultant loss in jobs makes this Succession Planning and Business Transition issue a massive double whammy!For anyone in this position, there are routes to secure value from the business, without having to run the business down and finally switch off the lights and close the door on the way out.