An important consideration for a small business owner when looking towards the future is the possibility that the ownership of their business may change. In fact, a third of privately owned businesses in the UK expect that this will happen to them within the next ten years, a slightly higher amount than the worldwide average.
Over half of all business owners in South Africa and New Zealand expect a change of ownership, the highest level in the world. At the other end of the scale, only about a tenth of Russian and Indian businesses expect a change. Businesses in the Phillipines, a rapidly developing nation, have in the past two years gone from almost no expectation of ownership change to nearly half of all business owners thinking it will happen to them. This is in contrast to the UK where the figure has remained the same since 2003, although if the anticipated crackdown on capital gains tax relief happens then a large increase is expected.
The reason for different countries having such huge differences is thought to be related to low interest rates, banks willing to lend and successful businesses with high profits creating an entrepreneurial culture. This is particularly true in the high levels of anticipation of business ownership change throughout the western world.
For many businesses in the UK it will be useful for them to have some form of an exit plan in case the day comes when it seems like the right time to sell. This is because:
- It will be one of the most important decisions you ever make, both for the company and your own finances
- In order to continue the success of the business following a transition of ownership meticulous planning is required
- You will wish to make as much money from the sale as possible!
With this in mind, the commonest forms of ownership change in the UK are:
- Trade sale – over half believe that they would sell their business to someone else when the right time arrives
- Management buy out / buy in -16% of UK business owners believe they will sell their business to the management team within ten years
- Private equity investment – 13% feel they are likely to be bought out by investors, lower than the global average expectation of 20%
- Flotation / IPO – only 8% feel they are likely to make a public offering in the next ten years
Hat-tip to Robert Moore from Business Data International Limited