Clear majority of SMEs lack succession plan

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64% of bosses of UK’s small and medium-sized enterprises (SMEs) do not have a clear plan in place to ensure that their business does not suffer when key staff leave, according to Aldermore’s latest Future Attitudes report.

This equates to 3.52m companies with fewer than 250 employees and is an increase from 2017, when the figure was 61%.

Aldermore said this is despite 45% believing that the biggest threat to their business would be if senior executives leave their organisation.

62% of SME leaders also admit to not having their own exit strategy. However, Aldermore said the younger generation of UK SME owners seem to be more organised when thinking about their eventual departure. The research also revealed that 56% 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%), followed by handing over the reins to other senior colleagues (25%) or family members (23%), and this is likely to happen two to five years from now.

Top five ways of departure for business leaders: 

Ways of departure % of SME leaders
Liquidation 29%
Handing over the reins to other senior colleagues 25%
Handing over to other family members 23%
Selling the business to another company 21%
Sell to a private equity firm or other investor 16%

For bosses who haven’t planned their departure, 33% say this is because they don’t ever plan to leave the business, with over a quarter (28%) saying they are currently focusing on building the business. 25% 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.”

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