There are over 17,000 businesses in the Gippsland region, from coffee shops to construction companies. Some are more successful than others, but success does not always equate to riches when it comes time to retire. In fact, more than 350 businesses close their doors each year throughout Gippsland, many because they aren’t in a position to sell or transition new owners into their business upon retirement. With the remainder of the Baby Boomer generation set to retire over the next decade, that leaves a lot of business owners with the conundrum — What do I do with my business when I want to retire?
The most successful business transitions are those that are planned early – years in advance. Whether you intend to list your business for sale or transition by bringing through existing staff, careful planning can make or break a successful transition out of your business and into retirement. Even when the transition involves keeping it in the family, a study by The Family Institute shows that only 30% of family businesses survive the second generation, and only 12% survive the third generation. This is largely because of lack of planning, assuming that a handover will be “business as usual”.
Speaking to long-term business owners, a key goal in any transition, apart from the financial aspect, is the business legacy. Outgoing owners want to know that their business, which they’ve dedicated their professional lives to building, is left in capable hands. They want to know that the service they have provided will continue, to uphold the same values they held. The difficulties in finding a buyer for your business that will also maintain the legacy of your business leaves many business owners stuck, unwilling to sell to potential buyers while simultaneously wanting out. Therefore, in many cases, the most effective way of ensuring your businesses legacy is maintained is through an internal transition, encouraging employees that already know and work in the business to step up and take over.
Whether you intend to sell now or it remains a distant goal, the team at ROPAN is well-equipped to help prepare your business for a transition to new owners as you move into retirement. We undertake a holistic approach in analysing your business, reviewing potential transition strategies and most importantly, aligning your business transition goals with creating an income stream, allowing you to enjoy the fruits of your labour in retirement.
This article has been caringly penned by Scott Henning, a Financial Advisor at ROPAN Financial Services. As generous supporters of Gippslandia since our inception, ROPAN is committed to providing advice that benefits all Gippslanders.