Businesses stand firm: “Not a good time to sell”

• Increasingly, business owners believe now isn’t a good time to sell
• Recession quoted as main reason not to sell
• Succession planning awareness increases as businesses prepare for turn in the market

ASB’s Succession Planning Monitor for the first quarter of 2009 confirms that market sentiment continues to be cautious about selling. Many businesses are using this quieter patch to strengthen their foundations, making them more profitable or saleable when the market recovery arrives.

The latest data from the ASB Succession Planning Monitor has shown a lower net index* of -81.1%, a further decrease of 7.1% from the last survey confirming respondents’ position that it isn’t a good time to sell their business. Only 8.3% said yes, it is a good time to sell while 3.8% didn’t know whether it was a good time to sell. While a number of reasons were stated a major one was that being a business owner assured their own employment. The survey also shows many pushing selling plans out past the five years point.

The main reason not to sell for 59% of the sample was purely because of the state of the economy. They recognised that they would not realise the perceived value of the business in the current economic climate.

Some comments from business owners are: “I don’t think we would realise the full value of our assets if we sold right now”; “I don’t think it’s best to sell because of the downturn at the moment, it’s not a good time”; “I want to keep it (my business) because I need a job.”

James Mitchell, ASB’s Chief Executive, Relationship Banking says, “The report shows there is a general increase in awareness of the succession issues around owning a business and the necessity to plan to capture more value when the market turns again. Less people are showing uncertainty with those responding ’don’t know’, when asked how they will realise the value of their business or when they will sell, decreasing by 12.2% and 11.1% respectively.”

The most important factors for determining the value of a business remain 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.

“It appears that while the economic climate remains as it is, business owners have started recognising that the current economy has given them time to prepare a thorough succession plan. 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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