SME owners need to make succession plans in good time

The ramifications for owners who depend on the sale of the business to fund retirement are far too often overlooked until it’s too late by mature age principals that are ‘rusted’ to the helm of their businesses instead of implementing an exit and succession strategy when time is on their side.

There are many reasons for this ‘rusting on’ and ‘fossilisation’ that includes an inability to find an appropriate buyer or uncertain economic conditions forcing business owners to put their sale and exit aspirations on hold.

Unfortunately, as time marches on, health and commercial capacities are diminished and this leads to once dynamic business owners making increasingly poor or no decisions at all.

This in turn results in the ‘perfect storm’ with erosion in confidence as leaderless employees leave; anxious customers and suppliers seek alternate relationships and financiers reluctant to fund and support the enterprise.

As the downward spiral gains momentum business confidence is eroded further, revenue shrinks and business value is depressed.

It’s also a growing reality that many children of business owners don’t want to take over the family business. Equally employees are reluctant to buy the company as they lack the funds or motivation to take on the responsibilities of ownership.

Even the partner model of accounting and legal practices is failing advisory business owners as the new generation of practitioners are not as keen to embrace ownership as past generations have.

The main reason is the younger generation is burdened with debt! They have school fees, lifestyle expenses, house loan repayments, marriage costs, children to fund and as a result have no money left for business debt!

After young people finish their education they are looking for a stress-free employment situation as a key focus is to reduce the volume of debt.

But business owners don’t have to ‘miss the boat’ finding potential buyers that so many will need to fund their lives in retirement.

They deserve to be rewarded for the years devoted to their enterprise – hence the need to start the exit and succession journey as soon as possible with the end game or finish line being the primary objective.
One of the most frequently asked questions from those selling small businesses has to do with where and how to find buyers.

There’s an old saying, “Fish where the fish are biting”.

Identify the target group who is most likely to buy the business, and then consider strategies about where and how to best reach these prospects.

So why consider PR?

Put quite simply, if you want to reach a broader group of prospective buyers or investors, a business owner needs to raise the marketplace profile, brand and presence of their enterprise.

In many cases, PR can achieve far more traction than an investment in advertising and similar marketing activities.

Small businesses are used to implementing guerrilla tactics and getting the word out via networking, marketing, hospitality, trade shows, delegations, etc.

However, with the sale of a business it’s time and discretion that are more important with messages that strategically promote the business to potential buyers and investors.

PR has a very different strategic imperative and focus as it promotes the company first and its products and services second. Articles are used to highlight the depth of the business; its successes and achievements; robust internal systems and efficient operating practices; HR strength; etc.

A further benefit of PR, it acts as a prequalifying process motivating prospective buyers to consider acquisition or as a disincentive to those that lack the funds or capacity to purchase.

Basically, it is utilising PR in a very targeted, strategic and tactical manner to build creditability and awareness through a program that educates and informs the target audience i.e. the potential buyer or investor.

“What guarantee of success” is another question that’s often asked by business owners when they consider a PR proposal.

My response is that there are no guarantees – however what I am certain of is that the likelihood of a zero outcome when seeking a buyer at time of retirement will be much greater than doing something now while time is on your side!