New research from wealth manager Charles Stanley reveals that UK business owners are in a precarious position when it comes to establishing effective exit strategies and succession planning. Almost half (48%) of businesses questioned admit to not having a plan in place, and this number could be even higher, as more than one in ten (13%) say they haven’t even considered the need for an exit plan, while a further 3% aren’t sure whether they have one.
Given this lack of planning, business owners remain surprisingly optimistic about the future: 71% say that they are confident they could step back from their business in the most tax-efficient way should they have to sell up or pass it on.
The new Fortune Favours campaign from Charles Stanley draws on insights from more than 500 UK business owners and entrepreneurs, to offer a snapshot of the challenges and opportunities facing the leading wealth creators in today’s volatile business environment. Delving into business sentiment and attitudes towards exit and succession planning, the research is timed to coincide with Charles Stanley’s Exits in the UK report which analyses transaction data from high-growth companies to provide detailed insight on IPOs and acquisition trends, and guidance on developing a robust exit strategy.
When questioned on the lack of exit strategy, 14% of business owners simply didn’t think they needed one. A fifth (21%) had no desire to sell their business, while a quarter (24%) thought that it was too early to consider.
Despite this, on average, business owners plan to step away in 7 years’ time. Two in five (41%) confirmed they plan to step away from the business within the next decade. While one in five (20%) said they were planning to step down in 10-15 years. Almost the same number (21%) said they’re unsure when they’ll take the leap.
Why business owners and entrepreneurs haven’t got one in placeExit strategySuccession planIt’s too early to think about it yet24%24%I don’t want to sell my business21%13%I don’t think I need one14%10%I’m not going to exit / hand over the business10%10%I’ve only just taken over the business / started the business8%8%I don’t know what to do about the future / who to leave my business to8%10%I don’t want to pass my business to my children5%7%I don’t know what my plan / strategy might be5%11%My children don’t want to take over the business, so I don’t know what to do4%5%
Turning to succession planning, the report also reveals that well over a third (37%) of businesses have no succession plan in place, and a further one in ten (10%) have not thought about it. Much of this is driven by uncertainty; 11% aren’t sure what their plan might be, 10% don’t know who to leave the business to, and 5% have nobody who wants to, including their children.
The report also sheds light on the biggest concerns that business owners have about their exit strategy and succession plans. Naturally, 21% were most worried about seeing their business fail and 18% were most worried about their employees’ future employment. Concerns over the current economic climate also featured heavily, with 20% saying that they were most worried about their business being downgraded due to soaring interest rates and high inflation.
Andrew Meigh, Managing Director of Financial Planning at Charles Stanley, said: “In recent years, business owners have understandably had their focus restricted to the short term. They have had to navigate first through the stormy waters of the pandemic, and now through choppy seas of difficult macro-economic pressures including high inflation and interest rates. However, that makes it no less concerning that a high number of UK business owners have no future plan in place for their business, leaving them vulnerable.
“This vulnerability may not have been fully appreciated. A large majority of owners are confident that they will find a tax-efficient exit, but this is a remarkably difficult feat without adequate planning. The easiest way to do this is to seek independent advice, which goes beyond tax efficiency. To make a rather blunt analogy, it’s universally accepted that having a will is sensible and prudent – the same idea applies to business. It is of the utmost importance for owners to have contingency plans for when they need to step down and pass the baton to the next proprietor of their business.”
Charles Stanley is on hand to provide a financial planning perspective to business owners and their advisers as they decide the best way to exit their business. It works with legal, tax, and accountancy teams to help owners structure and manage owner wealth outside their business, and ensures that a wealth plan aligns with a holistic plan for life including philanthropy, new business causes, and personal life and retirement. To access Charles Stanley’s Exits in the UK report, please visit: https://www.charles-stanley.co.uk/insights/knowledge/exit-in-the-uk
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