Private business owners prefer gradual sell-down

Selling, succession plans and remuneration policies were key issues in a recent study of privately owned businesses.

Don’t sell
Deloitte and Moyle Consulting’s nationwide survey of privately owned businesses  found 82% of business owners feel now is a bad time to sell. When it did come to selling an enterprise, most preferred the gradual selldown option to an outright sale.

Sort out your successors
Deloitte partner Bill Hale says the survey highlights the importance of identifying appropriate successors, as well as establishing a gradual succession plan. This allows for a smooth transition of the business to the next set of owners.

“With more business owners heading towards retirement there simply isn’t a great surplus of buyers out there, and some of those that are interested are often looking at paying below market rates.”
 
Mr Hale says business owners needed to invest in planning for a successful ownership transition – maybe involving other members of management or family members assuming ownership.

“Otherwise they may become prey to some of these buyers adopting vulture-like tendencies.  Taking a ‘she’ll be right’ attitude in this market won’t cut it.”

Two-thirds of survey respondents don’t have any formal plan in place for business ownership transition.

Remembering remuneration
Moyle Consulting managing director Jarrod Moyle says the survey found that the lack of clear remuneration policies could be a hindrance in any sale process, because buyers were unclear as to how employees were rewarded or incentivised.

While most businesses aim to provide employees with above market remuneration, this is often achieved through informal discussions with competitors about market rates.  

But family members do not always benefit. The study shows only 2% of business owners are prepared to pay above market rates to their own family members. A fifth were paid at a level below the market.
 
“Time and energy on a well thought through remuneration plan could boost the motivation and loyalty of key employees, as they could well be the future owners of the business.”