With many New Zealand small business owners approaching retirement age, succession planning is a major issue, accounting software provider Xero says.
Xero has released a report, Success through succession planning, which urges accounting firms and other small business advisors to step up to make much-needed improvements to New Zealand's lack of succession planning.
Xero says more than 90,000 businesses are owned by people aged 55 and over.
"Most of them will exit from their business within 10 to 15 years. A recent Xero survey found that 8% of all business owners are hoping to retire in the next year alone."
New Zealand Law Society information shows at at 10 October 2017, 37% of New Zealand's law firm directors, partners and sole practitioners were aged 55 or over.
"Professionals who served small businesses agree that most owners don't have a succession plan. This potentially undermines the price they'll receive when selling their business, and the quality of retirement that follows. It also diminishes the quality of the handover to the new owner," Xero says.
A Xero workshop which brought together small business advisors, brokers and policymakers identified a number of areas where succession planning typically breaks down:
Forming an exit strategy: Owners don't understand the importance of succession planning.
Getting ready for sale: Owners don't realise how long it takes to get a business ready for sale.
Making the business sale: Owners don't know how to put together a pitch that summarises the opportunities to prospective buyers.
Xero says it's up to accountants, bookkeepers and small business advisors to support small business as baby boomers leave the sector.
"Transitioning owners out of a business involves accounting, counselling, valuation, negotiation and contract law. No single professional can handle it all. But business owners need someone they can trust and rely on throughout the process."
It says as the primary advisors to small business, accountants and bookkeepers can play a role at each stage.
While the focus is on accountants, Xero sees a role for lawyers in the process. It suggests that during the second phase when a business is being prepared for a sale, advisors set up an advisory board which could include a lawyer, an additional accountant, a marketer, a trusted business mentor, or any other experts.
Similarly, in the third phase when a business is being sold, a small team of experts, including lawyers, will be used to draw up the contract.