A recent survey carried out in June 2013 reveals the lack of planning among business owners in the small and medium sized segment about their retirement.
Reflecting on the disturbing trends that were identified in the MGI Australian family and private business survey, Succession Plus Pty Ltd Founder and CEO and President of the Australian Chapter of Exit Planning Institute (EPI), Craig West said that far too many SMEs were jeopardising their retirement plans and futures through lack of planning and focus on the issue.
Key findings from the MGI survey included: the number of business owners in the 60 to 69 year age bracket has increased by 16% in the last three years from 21% in 2010 to 37% in 2013; 58% of family business owners indicate that the younger generation is not interested in actively managing the business; and 33% are entirely reliant on the sale of the business for cash to fund their retirement; and yet 75% have not agreed or documented any proposed succession strategy.
According to Craig West, any business, financial analyst or commentator would see the inherent danger within these numbers - simply that there is an increasing number of people approaching retirement age who are badly prepared for succession or exit but whose retirement funding will be at least partly and in many cases entirely dependent on them achieving some level of successful exit strategy.
Given that many business owners spend the vast majority of their time day-to-day actually running the business, they don't have the strategic focus required to implement such a strategy.
During his presentations and workshops, Craig West regularly quotes Steve Covey's second habit, ‘Begin with the End in Mind’, to illustrate to business owners that they must be focused on determining their exit strategy and working towards it as a key aspect of managing the business.
Many advisers in this space also need to understand that a business succession or exit plan is a process that often takes anything from 18 months to 5 years. For the business owner, the comfort and certainty provided by a definite and defined process towards an exit may be the trigger needed to allow them to commit to the decision.