Two thirds of SME owners have no plan when key staff leave

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The percentage of small businesses clueless as to what to do when senior executives move on is on the rise, warns SME bank Aldermore

Around two thirds of SME owners have no clear plan in place to ensure their business does not suffer when key staff leave.

This equates to 3.52 million British companies with fewer than 250 employees, according to the latest Future Attitudes report from specialist SME lender Aldermore.

This year’s 64 per cent figure is three per cent higher than 2017, when 61 per cent of SME owners did not know what to do when senior staff exited.

Yet over two fifths (45 per cent) believe that the biggest threat to their business would be if senior executives leave their organisation.

Three in five (62 per cent) SME leaders also admit to not having their own exit strategy. However, the younger generation of UK SME owners seem to be more organised when thinking about their eventual departure. The research also revealed that over half (56 per cent) of those aged 18-34 having a succession plan in place.

For business leaders of all ages who have already planned their exit, the most common “out” is liquidation (29 per cent), followed by handing over the reins to other senior colleagues (25 per cent) or family members (23 per cent), and this is likely to happen two to five years from now. Twenty one per cent plan to sell to another company and 16 per cent hope to sell to a private equity firm or other investors.

For bosses who haven’t planned their departure, one third (33 per cent) say this is because they don’t ever plan to leave the business, with over a quarter (28 per cent) saying they are currently focusing on building the business. Furthermore, one quarter (25 per cent) admit that their departure is too far in the future to plan for now.

Carl D’Ammassa, group managing director, business finance at Aldermore, said: “For UK SME leaders who have planned their own departure, our research tells us that on average, they aim to leave their company in just under four years’ time. What is troubling is that there are fewer senior executives with formal business succession plan compared to a year ago.

“Running a business can be very time consuming with ongoing demands from customers and staff. These challenges exert substantial pressure on leaders, so it is vital that a succession strategy is planned out to ensure businesses across the UK do not suffer when changes to key executives occur.”

Opinium Research surveyed 1,002 senior decision makers in UK SMEs for Aldermore between 10-17 July 2018.