Ageing baby boomers ill prepared for sale of their business

The survey of privately owned businesses throughout the country found that the climate of economic uncertainty, global recession and restrictions on access to capital in the local market had swung business owners away from the outright sale option. In fact, 82% of business owners feel that now is not good time to sell.

With the average age of business owners in New Zealand estimated at 58, there therefore needs to be renewed focus on planning for successful succession process, says Deloitte partner Bill Hale. “Unfortunately, two-thirds of survey respondents don’t have any formal plan in place around how they will achieve transition of ownership of their business.”

Hale says one of the survey’s key findings is that identifying appropriate successors and establishing gradual succession plan is more important than ever. “With more business owners heading towards retirement there simply isn’t great surplus of buyers out there, and some of those that are interested are often looking at paying below market rates,” Hale says. “So business owners really need to invest in planning for successful ownership transition which may involve management or family members assuming ownership. Taking ‘she’ll be right’ attitude in this market won’t cut it.”

The survey found that most owners identify successors from within their current network of contacts and usually identify people within the business, by either grooming management or employees (38%) or family members (22%). But Hale questions whether business owners are casting the net wide enough to maximise value and also to identify the right person to maintain and enhance the culture and heritage that have been built up over time.

Jarrod Moyle, managing director of Moyle Consulting, says the survey found that the lack of clear remuneration policies could be hindrance in any sale process because buyers were unclear as to how employees were rewarded or incentivised.

While most businesses aim to provide employees with above market remuneration, this wasn’t always the case with family members working for the business, Moyle says. Only two percent of business owners were prepared to pay above market rates to their own family members and fifth were paid at level below the market.

“Time and energy spent on well thought through remuneration plan could boost the motivation and loyalty of key employees, as they could well be the future owners of the business. Ultimately this could lead to better exit outcome in terms of ease, price and cultural fit, which is what most business owners are after following years of hard work.”

• To read the full survey report, go to www.deloitte.com/nz/succession.

Visited 10 times, 1 visit(s) today
Close Search Window