No Exit for UK Entrepreneurs
A majority of UK entrepreneurs are risking the long–term success of their business by not planning their exit, according to research by accountancy firm Deloitte.
The company’s Entrepreneurship UK: 2008 report found that almost three–quarters (74%) of entrepreneurs have failed to give “adequate thought” to their exit strategy, whether that involves selling up or transferring assets to a family member.
The research revealed that 39% have no exit strategy in place at all, while some 35% of respondents said they would simply wait for an opportunistic third–party offer. Deloitte’s head of entrepreneurial business, Tony Cohen said:
“Having a clear exit strategy in place from the outset may sound counter–intuitive but is, in fact, essential,”
“With entrepreneurial businesses, it is vital to plan for the future, growing the value and attractiveness of the business by implementing a clear development strategy from the beginning. This should include putting in place a strong management team to lead the business following the eventual departure of the entrepreneur.”
A failure to plan long–term could also weaken a bargaining position at a later stage, he added, particularly when selling to private equity investors who, according to figures, buy more than 60% of family businesses.
“A lack of planning results in difficulties agreeing a price, with owners reluctant to give potential investors access to vital financial information,” Cohen continued. “On the positive side, good succession planning through a management buy–out can ensure the family firm maintains independent ownership and stewardship.
“Time spent planning for the inevitable and structuring the business correctly is seldom wasted,” he added.
Rosana Mirkovic, senior policy adviser at the Association of Chartered Certified Accountants, said a lack of awareness of business value is one of the biggest obstacles to exit planning.
“Many small–business owners have the idea that their company doesn’t exist without them and very often they aren’t aware of the value of their assets, especially if they are intangible assets such as reputation, or repeat business,” she said.
“Take advice at an early stage from an external consultant or an accountant if you’re in any doubt what your options are, and this will help you get an objective picture of your company’s worth,” she added.