SME owners should start planning their exit strategy well ahead of their prospective retirement date as one third (33%) of small business directors in the UK are now over the age of 60.
Accountancy and consultancy firm Moore Stephens found that the average age of directors of UK SMEs today is 54.5 years old, with two-thirds (65%) over the age of 50, based on its analysis of 403,000 directors on the boards of 83,000 UK SMEs.
The firm warns that many SME owners risk putting themselves at a disadvantage on exit by failing to make succession plans far enough in advance, either because they are too busy running the business or because they underestimate the time required to get everything in place.
For example, it explains that it may take several years to get a business ready for a trade sale, but many small company directors assume that this will be a relatively short and straightforward process which they think will take only months.
Restructuring may be required to ensure the business is as attractive as possible for potential buyers, which takes time to plan, implement and bed down.
In addition, entrepreneurs need to take time to review their tax arrangements with their professional advisers and ensure the exit is structured in the most tax efficient way, both for themselves or any family members taking over the business or its assets.
Steve Wheeler, a partner in the Private Client Services team at Moore Stephens says, “Company owners frequently either don’t feel ready to address this issue until it is almost upon them or they are too busy with day-to-day operations to worry about it.”
“If they take a forward-thinking approach, they can control the process to make sure that when they step down, they do so on the most advantageous terms for them.”