Businesses are hitting the brakes on plans to sell shows ASB

• More than 80% of respondents think now is not a good time to sell their business
• Only 25% have plans to sell in the next five years
• Smaller businesses are far less prepared for unforeseen circumstances

The current economic climate is impacting New Zealand businesses with 82%
of close to 500 businesses surveyed in the first ASB Succession Planning
Monitor delaying plans to sell their businesses.

In fact, 75% of respondents have no firm plans to sell in the next five years.
This shows a strengthening trend of companies preferring to sit tight for the
next few years, compared with earlier surveys* which show around a third of
those surveyed had plans to exit their business.

ASB’s Succession Planning Monitor surveyed privately owned or franchised
small businesses (annual turnover under $1m) and medium to large
businesses (annual turnover between $1m - $150m) over the July to
September quarter this year.

ASB Head of Relationship Banking and Financial Services, James Mitchell
said the fact that so many business people have no plans to move on is not
surprising in this market.

“It’s a sign of the times. In adverse economic conditions, people lose
confidence in the market, and have lower expectations of what it is likely to
deliver. For private business owners, this means their focus shifts more
towards sustaining their business rather than expansion.

“What is surprising is the lack of planning evident from the small businesses
when unforeseen circumstances hit. Fewer than half the small businesses
surveyed had comprehensive plans in place should this occur, which is of real
concern in these conditions.”

Small businesses were particularly unprepared in the event of a business
partner wanting to exit their shareholding, with fewer than 40% saying they
had a contingency plan in place.

“In ASB’s experience, unforeseen circumstances arise more frequently in
times of economic uncertainty. Shareholders might need to exit suddenly due
to other business or personal circumstances.

“Plans need be in place to enable the business owner to react swiftly so that
business operations can continue without impacting the bottom line. It’s really
important to have a robust plan that includes risk assessments to help carry
people through tough times. This survey shows our small businesses are
particularly vulnerable.”

When it came to determining the value of their business in the current market,
around 23% did not know what their business value was.

The most important factors determining the value of all respondents’
businesses were commonly found to be customer base, profitability and total
turnover. Larger businesses placed more emphasis on staff and brand
strength as an important influence on the business value.

“Whether you run a small or large business, it takes time to incorporate
succession planning into it. ASB has the tools to help people through all
business cycles, and we’ve geared up our proficiency in succession planning
in particular. We offer a specialist succession planning guide, expert
personnel, and support services to ensure businesses can get their
succession plans into shape. We are committed to monitoring and reviewing
market sentiment in this area,” James Mitchell said.

* The Massey University 2008 survey of 1342 New Zealand SME business owners showed 34% intended to exit their business within the next five years, and the PWC ‘Clever Companies’ Survey 2008 showed 31% of privately owned businesses were planning a change of ownership.