Owners of small and medium-sized businesses (SMEs) in New Zealand are being encouraged to act now to avoid an uncertain retirement, marred by poor planning.
Three out of four business owners are pinning their hopes on selling up to pay for their retirement, but 30 percent acknowledge that their businesses wouldn’t survive without them and even more – 47 percent – don’t have a plan in place to exit their business.
These findings were uncovered in new research released by Xero. It suggests the ‘she’ll be right’ attitude of Kiwis is great for getting businesses started, but more attention is needed well before they plan to retire so SME owners get what they’ve worked so hard for.
Xero New Zealand country manager, Craig Hudson, says of those aged 55-64 looking to retire in the next few years, 90 percent of those SME owners would like to fund their retirement by selling the business.
“The lack of planning and forward-thinking by SME owners about the succession of their business is concerning, as many Kiwis will be impacted when these business owners decide to sell up or exit the company.
“The fact a third of owners haven’t even spoken to anyone regarding what happens to their business once they exit means they haven’t thought about who their potential buyers are, how much the business is worth and whether their business would survive without them.
“Any business owner who has put in the time, money, blood, sweat and tears to build their company would want to keep it thriving, and any owner looking to retire needs to find someone competent to take over. The best way to make sure of that is to develop a succession plan,” Craig says.
Also concerning is that 30 percent of business owners said their business wouldn’t run without them, which means if anything happened to the owner, employees along with their families would also be affected.
To ensure there are no surprises and to be prepared for when life throws curve balls, it’s crucial for small businesses to be thinking and planning long term, including knowing the value of their business.
The earlier SMEs can get a plan in place, the better, as business owners don’t want to be forced into making a decision due to a lack of planning.
Four ways to prepare your business for sale
- Get an advisor on board It is critical to talk to an accountant or bookkeeper as they’ll be an important reference point when considering your options. You don’t need to go through exiting your business alone, as they can provide you with expert advice to guide you through the entire process.
- Get your books in order Having your books in order is a priority because prospective buyers want to know how your business is performing, where your customers and target customers come from and what products are in demand etc. With online accounting software, this is easy to manage effectively.
- Staying or going You may want to be involved in the business despite exiting the day to day running of it, so if you want to remain as an advisor, you should discuss the possibilities of remaining as a shareholder or director with your accountant or business advisor.
- It’s more than numbers Selling a business that’s been your passion means you will have mixed emotions about selling it, so give yourself time to come to terms with leaving the business and the change to come.
- 76 percent of SMEs plan to fund their retirement by selling their business
- 47 percent do not have any plan in place to exit their business
- 30 percent of SMEs say their businesses wouldn’t run without them.