2009 Press Releases
Businesses fail to plan for retirement
12.11.2009
For many small business owners, the net value of their business is their second greatest asset, after the family home. Indeed, for some, it is their most valuable asset. Despite this, many don't take the time to devise a satisfactory succession plan.
12.11.2009
For many small business owners, the net value of their business is their second greatest asset, after the family home. Indeed, for some, it is their most valuable asset. Despite this, many don't take the time to devise a satisfactory succession plan.
New research by Dr Bernadette Power and Dr Geraldine Ryan, Economics Department, UCC finds that less than half those operating mature small firms have a succession plan. This is surprising as a lack of forward planning can have serious implications for the business owner’s family and other key stakeholders (employees, suppliers, customers, and financial advisors).
As the average age of owner-managers of SMEs in Ireland steadily increases, many will have to find a way to exit their small businesses. Interestingly, 86% of owner-managers who successfully transferred their business stated that they had a succession plan in place prior to exit, while half of those who shutdown their business failed to plan ahead. This is a valuable lesson on the importance of preparation in the business transfer process for all small business owners. For socioeconomic development, the high social costs (loss of employment, disruption to local supply chains) associated with business transfer failures need to be recognised.
Currently, only half of those operating mature small firms have a succession plan (63% of those interviewed were over 50 years of age, and all those interviewed were operating their firm for over 10 years). This is especially worrying when one considers that two-thirds of these owner-mangers intend to use their business as the primary asset to fund their retirement. In fact, a larger percentage of those who intend to use their business as the primary asset to fund their retirement do not have a succession plan. Only 24% of those who intend to transfer the business to a family member have a succession plan. This figure is 29% for those who intend to tradesale, 22% for those who intend to sell to employees and 8% for those who intend to dispose of the asset.
To find out more about this study visit http://www.ucc.ie/en/economics/bodytext,87825,en.html
Picture: Dr Bernadette Power and Dr Geraldine Ryan
RMcD
As the average age of owner-managers of SMEs in Ireland steadily increases, many will have to find a way to exit their small businesses. Interestingly, 86% of owner-managers who successfully transferred their business stated that they had a succession plan in place prior to exit, while half of those who shutdown their business failed to plan ahead. This is a valuable lesson on the importance of preparation in the business transfer process for all small business owners. For socioeconomic development, the high social costs (loss of employment, disruption to local supply chains) associated with business transfer failures need to be recognised.
Currently, only half of those operating mature small firms have a succession plan (63% of those interviewed were over 50 years of age, and all those interviewed were operating their firm for over 10 years). This is especially worrying when one considers that two-thirds of these owner-mangers intend to use their business as the primary asset to fund their retirement. In fact, a larger percentage of those who intend to use their business as the primary asset to fund their retirement do not have a succession plan. Only 24% of those who intend to transfer the business to a family member have a succession plan. This figure is 29% for those who intend to tradesale, 22% for those who intend to sell to employees and 8% for those who intend to dispose of the asset.
To find out more about this study visit http://www.ucc.ie/en/economics/bodytext,87825,en.html
Picture: Dr Bernadette Power and Dr Geraldine Ryan
RMcD