A new study by Moore Stephens has shown that ageing directors of SMEs are failing to make adequate exit plans from their business, and thus driving down its worth and what they make from it when they retire.
Lack of retirement planning is meaning that directors are working and staying in the business longer than they want, damaging its value for potential buyers.
The study found that just over 12% of directors are aged over 70, working through the traditional retirement age, which is up from 2017.
If directors are not prepared to exit – either through need or want – they risk leaving the business when it is not in it’s prime and not worth as much to any potential buyers. We have worked with many directors who will “retire next year” but fast forward ten years and they are still there – having not invested in the business, or kept up with modern trends and practices, and are now losing out to the competition. By the time they actually retire the business is worth very little above its balance sheet value which is why a well planned over is key.
Many business owners don’t fully realise that they are the value in their business, so when they go, so will the value. They have all the relationships with the clients and don’t let others speak to them. and they make all the decisions without explaining to others how they have arrived at them. What maybe a million pound business with you in it will be worth a lot less without you, which is why is key that you pass that value on – and benefit from it in cash.
Mark Lamb of Moore Stephens said “After spending so many years building up a business, it’s a crying shame if SME owners can’t enjoy all the fruits of their labour when they retire. Company directors who are still working hard through their 60s need to make time to plan for what can often be a lengthy succession process, so they can exit in an efficient
It doesn’t mean you have to leave the business necessarily – you can bring in younger people with a new skills and perspectives to keep making it a success. You can then take a back seat, still earning from the business without working in it and it still having value should you want to sell it or leave to someone upon your passing. You’ve worked hard for your retirement, you should enjoy it.
This post is in no way meant to be bashing the older directors or their abilities, its simply pointing out that they are missing out on their business value and not reaping all they have sown.
If you have no idea how to maintain your business’s value or plan for your retirement then it is vital that you contact your accountant to make sure you are not losing out. You can reach us in the ways listed at the top of this blog.