Small Businesses

Over the next 10 to 12 years, about 90,000 business owners – 20 per cent of all New Zealand small businesses – are likely to retire or sell their companies.

Research commissioned by Xero has found many small firms have a distinct lack of succession planning.

The full report, set to be released next month, is designed to educate small businesses.

Xero New Zealand country manager Craig Hudson said the shocking statistic – and the lack of planning – was a cause for concern.

He said most small firms only focused on the present, but agriculture businesses had picked up on the need to plan ahead.

“The agriculture world have done this really well; they’ve seen that there’s a big issue because their daughters and sons aren’t wanting to get in and take over the family farm, so they’ve been fronting that for the last five-plus years, but with traditional business there hasn’t been a focus on it,” he said.

“We’ve got a whole heap of baby boomers starting to come out of work life and looking to retire as the statistics say, and that’s kind of scary that 90,000 businesses in New Zealand are looking to get out of business shortly.”

Small businesses need to step up and start planning for long term now, Hudson said.

“Get your books in order; make sure you’re checking in with your local business advisor, accountant and starting talk about what is your potential exit strategy and what your business today look like value-wise.

“You need to be having these hard conversations now so that you can be looking to the future.”

Hudson’s biggest concern was what business owners would have to sell, other than the hardware, the company vehicle or tools, if a plan wasn’t in place ahead of time.

“It actually takes quite a while to be able to prepare your books and make sure they are in sound order to be able to sell,” he said. “When you get the point where you actually have to make a decision, that’s where everybody loses.”

He said the short term impact of 90,000 fewer businesses in New Zealand would be significant.

The research found that if 90,000 business owners had no choice of selling the business or were looking to wind down operations, thousands of jobs would be on the line.

“Before we know it those 90,000 businesses are going to be out and what are those employees going to do? What are families behind those jobs going to do?”

The earlier you can get a plan in place, the better, Hudson said.

“If you can have 10 years to be able to prepare then you don’t have to make a decision, you don’t have to be forced to be making a decision. You can control the conversations, outcomes and negotiations to be able to maximise the value of your business, that asset you’ve created.”