Succession planning key for microbusinesses to avoid UK economy 'crater'

The UK Microbusiness community, which is said to employ around a third of the UK’s working population, is at risk of ‘leaving a crater’ in the UK economy due to a lack of succession planning amid a culture of low-income, later life working, according to new research from BusinessesForSale.com.

The report was commissioned to investigate the future stability of UK’s micro firms and found that these businesses tend to have older, ageing owners.

Almost three-fifths (58.2 per cent) of microbusiness owners plan to work beyond the age of 66, with 75 per cent paying themselves equal to or less than the living wage. Additionally, more than half (51.1 per cent) of micro firms don’t have any form of succession plan. Of those that do, just 53.7 per cent plan to sell their business privately.

Rufus Bazley, marketing director, BusinessesForSale.com, said: “Our research has found that most microbusinesses successfully support small numbers of staff.

“Most of their owners are aged 40 upwards and since under half have succession plans. In the event of a sudden change in circumstance, many would be unable to continue to trade.

“In 10 years’ time, when half the microbusiness owners will be in their 50s and 60s this could have incredible implications for the economy.”

The microbusiness community comprises largely of well-established businesses owned and operated by entrepreneurs for the long term. Most owners of microbusinesses surveyed were aged over 41, with virtually half (49.9 per cent) falling into the 41-55-year-old age group – a period when the majority of leaders of larger corporate firms take advice on succession planning and review the material worth of their businesses.

However, most micro firms (72.9 per cent) employed just 1-3 full-time staff. Subsequently these owners, who take it upon themselves to carry out a multitude of job roles, earn less than a living wage and don’t view their business as a long-term asset.

That’s despite the fact many micro businesses report excellent turnovers ranging between £1m and £5.5m in 5.2 per cent of cases. Yet profits remain modest with an average of £41,500 per annum across the sector, with 15.13 per cent reporting a loss or break even.

“The stats on the contribution microbusinesses make to the UK economy are beyond impressive,” added Bazley.

“Yet little is being done to help these microbusinesses to consider the issue of succession planning, presenting a sizeable threat to the UK economy is high numbers simply fold when the owners are no longer able to operate them.

“We need more initiatives to support these businesses through their entire lifecycle and reward their founders with healthy exit plans.”

Date published 10 May 2016 | Last updated 10 May 2016