Thousands of viable businesses are folding every year because bosses who retire or move on lack an effective succession plan, a government report warned today.
A study commissioned by the Treasury and carried out by the Small Business Council investigating reasons why some entrepreneurs fail to hand their business on revealed that up to 100,000 organisations collapse because of this every year.
Among the issues raised in the report, the government admitted that succession planning was not given a high priority in business support services, unlike starting a business from scratch.
It said changing social demographics mean fewer people want to join the family business, while there are a growing number of 'third-age' entrepreneurs who are retiring younger.
This is a problem because a lack of succession planning can hold back business growth - and succession failure can damage local economies through loss of jobs, knowledge and expertise.
Reasons for failure in this area fall into a few broad categories, according to the report, including essential knowledge held only by the outgoing owner and a lack of willing or suitable candidate to take over the business.
As a response, the report suggests raising awareness amongst SMEs about succession including management buy-outs, and improving support for people considering moving on.
The report also raised practical issues with the valuation process - especially intangible assets - and proposed to improve awareness of methods of calculating wroth of things like brand, reputation and potential earnings.
"There are benefits for everyone when a business is transferred properly," said small business minister Nigel Griffiths.
"Sellers are rewarded for their lifetime's work, buyers can take on a viable new business and cut their risks, while the UK economy benefits from retaining skills and expertise that may otherwise have been lost."
