February 13, 2018
More than one in two small business owners say they do not have a contingency plan in the event that they need to leave their business.
Mortgage Choice's Australian Financial Savviness Whitepaper found 53.3% of small business owners did not have a succession plan in place.
"This is an alarming figure but it does not come as a surprise," Mortgage Choice chief executive officer John Flavell said.
"Small business owners are notoriously time-poor and they have to deal with many immediate issues in order to successfully manage the day to day operations of their business.
"As a result, planning for the future often takes a back seat. But the reality is, no one can predict the future and sometimes things happen that will affect the future trajectory of a business.
"Succession planning is not just about planning for when you retire, which may be decades away, but planning for the unexpected.
"Who will take over the business should you be unable to work? What will happen to your employees? How will your business continue to be profitable in your absence?
"While it is not a pleasant subject nor an easy process to plan for, succession planning is vital and should not be neglected. Indeed, the sooner small business owners plan for tomorrow, the better position they will be in."
According to the Whitepaper, 56.7% of small business owners said they would use the profit used from the eventual sale of their business to fund their retirement.
"This is a very risky strategy to follow," Mr Flavell said.
"Different circumstances, such as market conditions and the economy, can affect how much your business sells for. Your business' services may be very profitable and in demand now, but it may be a vastly different picture when you sell it down the line.
"This is why it is so important for small business owners to not only have a succession plan in place, but be constantly putting money into their superannuation - wherever possible.
"Don't put off planning for another day. Start early so that you can give yourself peace of mind and ensure a smooth transition for your business down the line.
"Make an appointment to speak to a Mortgage Choice financial adviser who can help you make the right decisions for managing your personal and professional finances."