Lack of succession planning threatens thousands of businesses

Nov 30 2004 by Brian Amble Print This Article

Up to 100,000 small businesses a year in Britain are facing closure due to the lack of effective succession planning, according to a report published today

According to the Department of Trade and Industry's Small Business Service (SBS), although considerable support is provided for business start-ups and growth, the succession process does not currently the same attention.

The report argues that social and demographic changes mean that succession is becoming an increasingly important issue. Family members are less willing to join family businesses, there are a growing number of older owners and entrepreneurs and there is a trend towards earlier retirement.

But the absence of succession planning can hold back growth and make it harder for businesses to generate new ideas for future success, damaging local economies through loss of jobs, knowledge and expertise.

The basic factors that put a business at risk of succession failure include the business relying on the owner's specific knowledge (such as of markets, customers, systems) which cannot be easily passed on to a successor, the lack of a suitable and willing successor manager drawn from the ranks of employees or the owner's family and the absence of any plans for transfer.

The report recommends encouraging owners to address succession at an early stage, promote greater awareness of all the succession options, including employee buy-outs, and improve the quality and availability of advice for business owners.

It also suggests that succession support becomes an integral part of business support and advice services to provide business owners with information, training, advice and support on business transfer.

"As someone who ran their own business for ten years I'm well aware of the need to pass on the skills and expertise that were built up during that time," said SBS Chief Executive, Martin Wyn Griffith said:

"I hope that today's review will raise awareness of the issues and will give both policy-makers in Government and those who deliver business support an opportunity to ensure that more enterprises are transferred and new types of entrepreneurs are brought into business."