It is well known that the vast majority of start-up businesses fail within their first three years, so it is important to the UK economy that those businesses which have successfully traded for many years keep going when the owner either needs or wants to slow down and stop work.
But most owner-managed businesses have no exit strategy or succession plan to enable this to happen.
Definite figures are hard to come by, but I have seen it estimated that at least 70% of established SMEs have no strategy for what would happen to the business if the owner-manager becomes ill, dies in post, or just wants to retire and stop work.
Of course, it should be possible to sell a business which is profitable. But you will not get much (if anything) for it it there is no documentation which shows the full (and true) financial picture over the past years; no business plan looking ahead; no management accounts which show where the costs and profits reside; no procedures and systems in place so that the business can run smoothly without the current manager being available to help and advise.
Evidence shows that most SMEs lack this information, so what happens is that the business just closes, the owners lose all or most of the value they have built up over the years and all the employees lose their jobs. If you are lucky to get a buyer the price obtained will be a fraction of the business’s true worth.
Some people might say that this lack of forward thinking is just one of those things, but I say that at any time allowing expertise and know-how that has been built up over the years to just disappear is almost criminal: but especially now, when we are looking to grow our economy. We simply can’t afford to lose successful businesses just because the owner hasn’t thought about an exit strategy or succession plan.
Local Enterprise Partnerships (LEPs) should be targeting owners of SMEs who are aged, say, 50-60 to help them think about a succession plan and help them get fit for sale, but I have not seen any LEP strategy which has identified this as part of their programme. This is a major oversight: this lack of forward thinking helps neither the business owner nor the UK’s economy. Ensuring that successful businesses can survive the retirement or death of their owners ought to be part of any Regeneration and Economic Development Strategy. For relatively little effort each generation of business owners could build on what has gone before instead of starting again from scratch.
So, this has prompted me to put together an integrated team of experts who can work with business owners to think about how they structure their business so it is fit to be passed on as a growing concern; jobs are retained and the owner gets the true value for their lifetime’s work.
Contact me for details.