Businesses Delay Selling Plans in Tight Market
- An overwhelming majority of businesses say now is not a good time to sell
- A quarter of business owners plan to sell in the next 5 years
- Customer base continues as the most important value determiner
As the economic crisis continues to impact on New Zealand businesses, the latest data from the ASB Succession Planning Monitor confirms that, increasingly businesses do not think now is a good time to sell.
This is shown through an *index of -74 in quarter 4 2008, representing a net decrease of -3.3% from the previous quarter.
While over a quarter of businesses plan on selling within the next 5 years, an additional indicator shows a 6.6% increase in the 3-5 year selling horizon from quarter 3, 2008. This comes as business owners further extend their selling timeline expectations.
“The overall sentiment that we are seeing in the market place is reinforced in this report as one of caution but also that of taking the time to shore up and strengthen their business,” says James Mitchell, ASB Head of Relationship Banking and Financial Services. “Businesses are putting more value and emphasis on having a strong customer base, as well as seeking professional advice and support during these tougher times. By doing this, they should have a stronger business when the market does turn.”
Succession planning readiness showed modest increases across a range of circumstances such as: expecting an unexpected buyer to make an offer; unexpected illness; a partner exiting and making key staff shareholders.
“The results of this survey indicate that our businesses have started to think more about succession planning but there’s still a long way to go. Many of these companies haven’t put comprehensive contingency plans in place to ensure their short and long term survival. This type of planning should lead into a sound strategy for when the market improves. Survival is key in these times, however it is equally important to take stock and set realistic business goals giving direction for the future.”
The most important factors for determining the value of a business remains consistent with the results from the first report. The primary factors are still considered to be the customer base, profitability and turnover. Larger businesses place more emphasis on staff and brand strength but overall, the results are similar for both small and large business.
Determining the market value of a business in quarter 3, 2008 showed an concerning 22.6% of owners who didn’t know the market value of their business. This has now decreased to 13.5% which supports the encouraging statistics in the latest report that indicated people are increasingly seeking professional advice.
“Whether you run a small or large business, it takes time to incorporate succession planning into your business view. ASB has the tools to help businesses through all the cycles, and we’ve geared up our proficiency in succession planning in particular to help our customers work towards future proofing themselves – no matter what the future holds, says James Mitchell.”
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