Baby boomer businesses: Soon-to-retire Aussie entrepreneurs rarely have a succession plan in place
For many baby boomers, retiring will involve selling their businesses. But many Australian entrepreneurs aren’t preparing for this inevitability.
The numbers are staggering. The business and financial consequences many.
Yet, it’s an issue that doesn’t raise an eyebrow in Canberra and, for that matter, very little in the business community.
But, for a whole host of reasons, it should be front and centre of everyone’s thinking.
The issue is the retiring baby boomer, and what will happen to the many who have businesses to sell.
It’s estimated there are about 5.5 million baby boomers in Australia (those born between 1946 and 1964), and as the years creep up on this post-World War II generation, they are looking for healthy, long and, most importantly, secure retirements.
But for many baby boomers, this will first require the sale of their businesses. With at least 400,000 needing new ownership, that is a lot of small enterprises needing a new, and hopefully safe, pair of hands. Adding urgency to the issue is the fact that by next year, most baby boomers will have passed the official retirement age of 65.
Sadly, the evidence shows that many baby boomers, having diligently built their businesses over many years, have not given serious consideration to an exit strategy.
There’s no shortage of options, of course. Businesses can be sold outright, to other family members, or even competitors. A management buyout is another option.
What’s not an option is doing nothing. But that’s exactly what many baby boomers are doing.
What they often ignore is that succession planning takes time. It’s not something that can be done at the last moment, or, more accurately, done successfully at the last moment.
A successful exit strategy guide
First and foremost, people must mentally accept the fact ownership of the business will change hands. It does not necessarily mean not having a future role in the business, although what it is must be clearly delineated. New owners will often welcome sage advice, and even if that’s not the case, other businesses will want to tap into your skills, experiences and knowledge built up over many years. Whatever the outcome, selling a business must be seen as starting a new chapter in your life, not the end of the final chapter.
It also means accepting the business might go in a fresh direction. That’s typically not an issue when the business passes to outsiders, but it certainly can be if it remains in the family — as many do. Certainly, have an opinion, but acknowledge it’s just that, and if it’s rejected, then offer advice on how best to achieve the change.
As mentioned above, succession planning takes time. If it begins when the owner wants to retire, then it’s been left far too late. It’s a cliché to say succession planning begins the day a business starts, but like all clichés, it contains a kernel of truth.
If it’s a family business, think outside the box when it comes to choosing the next owner. Businesses are not like royal families where the oldest son is the first cab off the rank. Rewarding talent and hard work must come to the fore, which means younger siblings or daughters can get the nod — and this is increasingly happening.
Sometimes ownership decisions are difficult to make, and those bypassed may choose to go elsewhere. This is where so many family businesses, in particular, flounder to find a solution that is equitable to all parties, and the bad blood can prove fatal to the business.
This situation is compounded when the business isn’t financially strong enough to pay out the owner and still remain viable. In this situation, one option is for payment to be made in instalments. All these scenarios serve as yet another reminder of why succession planning takes time to get right.
Remember, too, it’s sometimes simply not possible to square the circle. You just have to make the decision you think is right for the business and stick with it.
Finally, don’t hesitate to get professional advice. Professionals can bring skills, relationships (especially if you are looking for a buyer), and, most importantly, perspective to the table.
As strange as it may seem, it’s often the case in family companies that the members are more relaxed speaking to an adviser than they are to each other. It’s not always the case that blood is thicker than water.
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