The typical Australian family business owner is now 55-years-old. Retirement or cutting down their hours is on their radars, but very few are putting the right plans in place to make it happen.
It’s estimated that at least 85 percent of businesses across the world are family owned[1]. In Australia, that means there are roughly 1.7 million business owners busy creating an enterprise from scratch or taking something small and making it grow.
Aside from a few well-known big family businesses, most are small to medium enterprises that employ around seven million Australians. Family business is a huge and significant part of our economy.
Most of these businesses are owned and operated by baby-boomers getting close to retirement. The typical Australian family business owner is now 55-years-old. Retirement or cutting down their hours is on their radars, but very few are putting the right plans in place to make it happen.
Just 30 percent of family businesses have succession plans. In the year to 30 June 2012, there were over 10,000 insolvencies in Australia, up from around 8,000 the previous year. Almost half of these were due to poor strategic planning.
In just two years from 2008 to 2010, I saw 12 businesses go into liquidation because their owners didn’t have them ready to hand over. Too many of us are hanging on for too long, not thinking about the options and acting on them while there is time.
Succession planning is always being put off by more immediate problems. But anyone thinking of retiring or stepping back in the next 3-5 years needs to start now.
It can be as simple as passing the business down to the next generation, but could also mean selling your business on the open market, merging with a competitor, publicly listing your company through an IPO, an internal management buy-out, external management buy-in, franchising or running the business out.
There’s no one-size-fits-all, but none of it is possible without planning.
I’ve seen businesses lose millions of dollars in tax because they didn’t have the right structure in place, or had failed to keep their asset registers up-to-date. We’ve seen businesses carefully built up over several years failing to deliver enough money to fund retirement, or worse still going into liquidation. For others it means that retirement has to be delayed for a few years while a business is readied for sale.
On the upside, we’ve seen businesses valued at $500,000 become million dollar enterprises over a few years by increasing their efficiency, adding new services and goods, and having a clean set of records to appeal to prospective purchasers.
The main point about succession planning is to start at the end. Business owners need to visualise what they want their lives to be once they’ve left their business, and then work towards that.
There is life after business. The challenge is to start working now towards what you want that life to be.
[1] Kontinen, T., & Ojala, A. (2012). Internationalization pathways among family-owned SMEs. International Marketing Review, 29 (5), 496 – 518. doi:10.1108/02651331211260359
