Businesses are hitting the brakes on plans to sell
shows ASB’s Succession Planning Monitor
· More than 80% of respondents think now is not a good time to sell their business
· Only 25% have plans to sell in the next five years
· Smaller businesses are far less prepared for unforeseen circumstances
The current economic climate is impacting New Zealand businesses with 82% of close to 500 businesses surveyed in the first ASB Succession Planning Monitor delaying plans to sell their businesses.
In fact, 75% of respondents have no firm plans to sell in the next five years.
This shows a strengthening trend of companies preferring to sit tight for the next few years, compared with earlier surveys which show around a third of those surveyed had plans to exit their business.
ASB’s Succession Planning Monitor surveyed privately owned or franchised small businesses (annual turnover under $1m) and medium to large businesses (annual turnover between $1m - $150m) over the July to September quarter this year.
ASB Head of Relationship Banking and Financial Services, James Mitchell said the fact that so many business people have no plans to move on is not surprising in this market.
“It’s a sign of the times. In adverse economic conditions, people lose confidence in the market, and have lower expectations of what it is likely to deliver. For private business owners, this means their focus shifts more towards sustaining their business rather than expansion.
“What is surprising is the lack of planning evident from the small businesses when unforeseen circumstances hit. Fewer than half the small businesses surveyed had comprehensive plans in place should this occur, which is of real concern in these conditions.”
Small businesses were particularly unprepared in the event of a business partner wanting to exit their shareholding, with fewer than 40% saying they had a contingency plan in place.
“In ASB’s experience, unforeseen circumstances arise more frequently in times of economic uncertainty. Shareholders might need to exit suddenly due to other business or personal circumstances.
“Plans need be in place to enable the business owner to react swiftly so that business operations can continue without impacting the bottom line. It’s really important to have a robust plan that includes risk assessments to help carry people through tough times. This survey shows our small businesses are particularly vulnerable.”
When it came to determining the value of their business in the current market, around 23% did not know what their business value was.
The most important factors determining the value of all respondents’ businesses were commonly found to be customer base, profitability and total turnover. Larger businesses placed more emphasis on staff and brand strength as an important influence on the business value.
“Whether you run a small or large business, it takes time to incorporate succession planning into it. ASB has the tools to help people through all business cycles, and we’ve geared up our proficiency in succession planning in particular. We offer a specialist succession planning guide, expert personnel, and support services to ensure businesses can get their succession plans into shape. We are committed to monitoring and reviewing market sentiment in this area,” James Mitchell said.