Few boomers have plans for their babies: survey

A good succession plan can take as long as five years to put together. Photo / Getty Images

Baby boomer business owners are nearing retirement but few have a formal plan for what do with their companies, a survey shows.

The ANZ Privately-Owned Business Barometer 2010 showed that of those businesses with turnover between $2 million and $150 million a year, 61 per cent of owners were more than 50 years old and 23 per cent were more than 60 years old.

Ross Verry, ANZ general manager specialist business, said owners had focused on shorter term performance.

Research showed that the level of formal succession planning by owners had remained very low over the four years of the barometer, Verry said.

Gareth Hoole, corporate advisory director at chartered accountants Staples Rodway, said about half of the privately owned business owners would be anticipating some form of retirement or exit in the next five years.

Small and medium-sized enterprises were the backbone of the economy, Hoole said. "I think that the preservation of value is obviously important for the individual and their family but it's also important collectively for the economy."

The survey showed only 13 per cent of respondents had a formal succession plan in place, Hoole said.

"We continue to hear how the market will become overcrowded with the number of private businesses for sale, but the reality is that succession planning does not automatically mean the sale of a business, or even the retirement of the owner."

A good succession plan could take as long as three to five years to pull together and might involve handing the business on to the next generation, a partial sale, bringing in professional management or even scaling up for a public listing.

Some owners of small and medium-sized enterprises may see succession planning as a strategy for larger organisations.

"I guess it's also the New Zealand way, she'll be right and everything'll work out okay in the end," Hoole said.

There were fewer potential successors coming through and it was also quite difficult to get finance to buy a business, Hoole said.

Many baby boomers may have inherited businesses from their parents. "Whereas now you're seeing that this Generation Y doesn't necessarily want to be in business."

Staples Rodway had been working with clients on succession planning for years but a Business Evolution Guide developed by its Melbourne affiliate office Pitcher Partners used a structured approach based on academic research and followed a seven step process.

Succession planning was a delicate matter of balancing complex business and family issues, and Hoole recommended people got together and filled in the guide.

"If business owners don't do this, they're ignoring a ticking time bomb and risk not leaving the legacy they would like to, but rather a business that is weakened and cannot continue to thrive without them."

PASSING THE TORCH

Privately-owned business barometer

* 51pc actively considering succession.

* 13pc have a formal plan, up from 11 per cent in 2009.

* 15pc have no plan, down from 25 per cent in 2009.

* 26pc say environment has delayed ownership change.