Small business owners and managers are risking it all by having absolutely no plans in place for their business when they retire or if they were to suddenly become ill or die, according to the latest research from Bibby Financial Services.
The survey found that more than half (56%) of entrepreneurs in the UK are burying their heads in the sand rather than face up to the fact that they won’t always be around to look after their business.
According to BDO Stoy Hayward, the business and accounting advisers, family businesses appear to be the worst culprits for not having firm succession plans in place and a lack of effective succession planning is the biggest growth barrier faced by these firms.
In fact, in the UK, only 24% of family businesses survive through to the second generation and only 14% make it beyond the third. Given that family firms comprise of over 1.6 million businesses in the UK and employ about half the national workforce, this issue is of grave concern*.
The reason for many firms not having succession plans in place, is the fact that over a third (38%) admitted that their business will probably close when they stop working – a serious blow for the UK economy not to mention an issue for the tens of thousands of workers employed by smaller businesses.
Furthermore, a quarter of business owners and managers confess that the main reason why they haven’t got around to doing any succession planning for when the time comes to hang up their boots is because they will find it hard to let go of the reins. Whilst, 21% just don’t think anyone else could do the job as well as them.
Commenting on the findings, David Robertson, Chief Executive of Bibby Financial Services said, “It is worrying that so many small businesses do not have a succession plan in place to help them prepare for their retirement or for if the unexpected were to happen. Whilst taking calculated risks is at the heart of every entrepreneurial business and successful entrepreneurs enjoy breaking the rules and pushing the boundaries, by not taking the simple step of ensuring that they have a good, well thought out contingency plan many firms could be jeopardising their employee’s livelihoods and threatening the future of their firm.
“Succession planning is a complex and emotional issue with owners and managers failing to take the bull by the horns for a number of diverse reasons including not wanting to face the fact that the business will not always be a part of their lives, difficulty in choosing between children as successors, feeling that no one can do as good a job of the running the business as they do and fear of loss of identity, to name a few.
The following pointers developed by Bibby Financial Services may help owners and managers take the first steps in ensuring that they have an effective succession plan in place:
Succession Planning Tips
Try to delegate responsibility and don’t put your eggs all in one basket.
In business, it always makes sense to avoid being over-dependent on anything – be it a key individual or an important client
- Always have a plan and start the planning process early so that you can carefully weigh up all the options and come to a decision that is best for your business
- Consider potential successors on their individual merits and avoid appointing someone simply because they remind you of yourself
- If you want to keep it in the family, members of your family should only be groomed for succession if they possess the appropriate skills and talent for the job
- When you are ready to start grooming a successor, provide them with an on-the-job training programme that is relevant and will enable them to achieve their full potential
- If you are planning to retire soon, set a date and stick to it. This date should be far enough in advance to enable your successor and the rest of your employees to get ready for the transition
David Robertson concludes, “Planning for the time when you will no longer head up your business is a scary prospect for any owner or manager. You may have spent years building your business from scratch, helped it grow and dealt with the knocks and bruises that inevitably came along the way. However, it is vital that if you want your business to continue, you need to prepare now by having a thorough succession plan in place.”