Business Succession and Exit Planning- Issues and Challenges.ppt

1、Business Succession and Exit Planning: Issues and Challenges,Professor Robert BlackburnPresentation to the 4th Craft and SME Summit Meet the Lisbon Agenda: Simplification and Business Succession 22nd -23rd April Portoroz, SloveniaSmall Business Research Centre Kingston University UK Tel: 00-44-20885

2、477354 r.blackburnkingston.ac.uk http:/business.kingston.ac.uk/sbrc,Objectives of the presentation,Provide evidence on business succession issues: point out the scale of the exit phenomenon Some definitions: Business transfer Business exit etc What are the challenges to business transfer? What can b

3、e done to raise levels of successful transfer? Business owner and support provider perspectives Conclude with some points for discussion,Why address business transfer?,Business closures do happen, but Already established businesses more likely to survive than new businesses Transfer has been shown t

4、o stimulate innovation Loss of employment if closed Post-transfer businesses show better performance (AISBR)Conventional wisdom is that there is a business transfer deficit in economies ie that the number of transfers could be increased,Some definitions,Business transfer: the transfer of the ownersh

5、ip of a business Business transfer success Business transfer failure Business exit: the end of an owners participation in a business Business closure: discontinuance of the business (could be voluntary or involuntary) Business failure: closure due to bankruptcy etc Business can be bought if thought

6、viable,Challenges to understanding business transfer and succession,Study of business transfer involves a variety of sub issues: human, economic, financial and legal No single dataset on exits and transfers Eg different nation state definitions and issuesBut, it is difficult to disagree with those f

7、amous words (adapted from Franklin):In this world of business ownership nothing can be said to be certain, except death and taxesWorldwide recognition that business transfer is now a critical issue for policy makers and support providers (EU, 2004),The scale of the potential business transfer phenom

8、enon,EU estimates over next decade (from 2004): 610,000 SMEs will transfer ownership Of which, 300,000 SMEs with employees and 310,000 one-person businesses Involves transfer of 2.4m jobs Business succession will be on the rise: Ageing of business owners (in line with an ageing population) Increase

9、in business formation in 1970s and 1980s: these business owners will be in their 60s Maturity of the businesses and product life cycle,Potential Business Transfers: Annual estimates,European Commission Best Report (2002) p46. Yearly transfers are averages for a five or 10 year period.,Business closu

10、res vis a vis transfers,How do transfers relate to business closures? Estimates suggest: 10% of the business stock close each year (eg in UK 400,000 closures and 400,000 new starts) Some of these businesses are bought and re-opened But, some transfers occur without having to close Difficult to calcu

11、late what % of starts are transfers,Exits: what happens to the business? (n=379),Source: SBRC (2001),What happened to the business?,Exits: what happens to the owners? (n=367),Source: SBRC (2001),Fate of the Business Owner,Barclays/BMRB research: closure does not mean failure,Percent HSBC Sold to ano

12、ther individual 23 34 Sold to another business 6 Passed to family member 3 3 Business failed 5 4 Closed voluntarily 48 37+14 Changes in legislation (IR45) 2 17 Business still operating 5 Illness 3 2? Retirement 1 9 Other 5,Businesses vulnerable to business succession,Business transfer more likely to

13、 occur amongst businesses with older owner-managers Inter-generational transfer a modern myth? Up to 24% transferred to family Declining with 2nd and 3rd generations to 10% Over time there has been a growth in outside family transfer Some data from the UK suggests that up 100,000 businesses pa may b

14、e affected by business transfer failure (SBS, 2004) Clearly, vulnerability is linked to owner-manager characteristics,Reasons for Business Transfers,European Commission Best Report (2002) p47,Types of Business Transfer,European Commission Best Report (2002) p8,Why does transfer fail? Sellers perspec

15、tives,Lack of exit readiness by owners Absence of planning: done at the last minutePsychological difficulty of letting go Ambivalence of letting the baby goSuccession advice involves paying fees: a deterrent?Difficulty in the valuation of the business How do we value eg IP and goodwill in SMEs? Some

16、 sectors more difficult than othersNot understanding the transfer systems Market place, legal, financial, human dimensions,Why does transfer fail? Buyers perspectives,People prefer to start their own business Lack of awareness of what is for sale Market imperfections Economies of scale for intermedi

17、aries Difficulty in working out the business Particularly in smaller firms absence of formal records Disentangling the business from the owner-manager Poor business performance,Supporting the Business Transfer Process,Assisting in succession planning is a long-term, complex process Covers emotional,

18、 technical, employment, financial, legal, marketing issues Market segmentation Businesses require bespoke advice Use of tried and tested advisers, succession advice part of an ongoing relationship Accountants particularly important Eg ACCA undertaken research in this area Role of markets in bringing

19、 together buyers and sellers,Conclusions,Business transfer is a multi-faceted activityBut should be a priority for attention by support providers and govt agenciesOf growing significance numericallyIndications that there is a deficiency in meeting the potential: a business transfer deficit,Conclusio

20、ns,Improve situation through owner-manager planning: from reactive to proactive Support providers raising their ability to meet particular needs of small businesses Human as well as conventional business issues Also an agenda for government: Bankruptcy laws, allowing honest failures? Need to improve

21、 EU and nat. databases on transfers Need to fuel the markets for business buyers and sellers,Selected references,ACCA (2005) Accountancy practices and the provision of ownership succession advice, ACCA Research Report No. 85, ACCA, London. Austrian Institute for Small Business Research (2002) Busine

22、ss Transfers and Successions in Austria, by P Voithofer, AISBR, Vienna. European Commission (2002) Final Report of the Expert Group on the Transfer of SMEs, May. SBS (2004) Passing the baton encouraging successful business transfers, Evidence and key stakeholder opinion, DTI, London. SBRC (2001) Opening up Business Closures, SBRC for HSBC bank, Kingston University.,