Business owners are in a “precarious position” when it comes to setting up effective exit strategies and succession planning, according to research from wealth manager Charles Stanley.
Almost half (48 per cent) of businesses questioned admitted to not having an exit plan in place.
But this number could be even higher, as more than one in 10 (13 per cent) said they have not even considered the need for an exit plan, while a further 3 per cent were not sure whether they had one.
Given this lack of planning, Charles Stanley said business owners remain surprisingly optimistic about the future.
Andrew Meigh, managing director of financial planning at Charles Stanley, said: “In recent years, business owners have understandably had their focus restricted to the short term.
“They have had to navigate first through the stormy waters of the pandemic, and now through choppy seas of difficult macro-economic pressures including high inflation and interest rates.
“However, that makes it no less concerning that a high number of UK business owners have no future plan in place for their business, leaving them vulnerable. This vulnerability may not have been fully appreciated.”
The report revealed that just under three quarters (71 per cent) are confident they could step back from their business in the most tax efficient way should they have to sell up or pass it on.
When questioned on the lack of exit strategy, 14 per cent of business owners simply did not think they needed one.
Meanwhile, a fifth (21 per cent) had no desire to sell their business, while a quarter (24 per cent) thought that it was too early to consider.
Despite this, on average, business owners plan to step away in seven years’ time.
Two in five (41 per cent) confirmed they plan to step away from the business within the next decade while one in five (20 per cent) said they were planning to step down in 10-15-years.
Almost the same number (21 per cent) said they were unsure when they’ll take the leap.
Meigh said: “A large majority of owners are confident that they will find a tax-efficient exit, but this is a remarkably difficult feat without adequate planning.
“The easiest way to do this is to seek independent advice, which goes beyond tax efficiency.
“To make a rather blunt analogy, it’s universally accepted that having a will is sensible and prudent – the same idea applies to business. It is of the utmost importance for owners to have contingency plans for when they need to step down and pass the baton to the next proprietor of their business.”
Turning to succession planning, the report also revealed that well over a third (37 per cent) of businesses have no succession plan in place, and a further one in 10 (10 per cent) have not thought about it.
Much of this is driven by uncertainty; 11 per cent aren’t sure what their plan might be, 10 per cent don’t know who to leave the business to, and 5 per cent have nobody who wants to, including their children.
