Succession planning grows in importance for older business owners
Elderly small business owners have been warned of the need to safeguard their financial future by adequately preparing for retirement.
Accountancy firm Moore Stephens has highlighted the importance of succession planning, given that the average age of a director in a UK SME is nearly 55 years old.
Meanwhile a third are over 60, and concerns have been raised that not enough individuals are planning for their future.
This includes managing their exit from the business, either by agreeing a sale or by putting the foundations in place for somebody else to take over.
Although it can be difficult for a business leader to hand over the reins to their business, it is important that they do so.
Leaving the planning until an individual is right on the verge of retirement can mean the process is rushed, while others may not want to disrupt the day to day running of the business in order to do it.
According to the Federation of Small Businesses, one quarter of SME owners are planning to use their business to fund their retirement.
This could mean that owners are putting themselves at a disadvantage by not considering life after their company.
Failing to secure the future of a company could leave it facing insolvency when a director retires from their position.
A sudden withdrawal of finance or a loss of leadership could damage both sales and reputation, causing a business to slide.
Filling key roles before such an event occurs and having a suitable financial plan in place can reduce the risk of this occurring, while owners are also encouraged to seek advice prior to making key business decisions.
Alternative finance options could be available to support the business or the owner may wish to consider a merger or acquisition for their business, passing on responsibility to those taking over in the process.
Regardless of the approach taken, the key is to plan ahead – only then can an individual be sure that they are safeguarding both their business and their own financial future.
By Phil Smith
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