Nearly two thirds of small and medium-sized business leaders do not have a succession plan

  • Over two fifths (45%) of UK SME decision makers believe the biggest threat to their business is the departure of senior executives;
  • And yet, over three fifths (62%) do not know how they will leave their business;
  • Liquidation is the most common ‘out’ for bosses who have already planned their departure.

Aldermore’s latest Future Attitudes report has found that just under two thirds (64%) of bosses of UK’s small and medium-sized enterprises (SMEs) have no clear plan in place to ensure that their business does not suffer when key staff leave.

This equates to 3.52m[i] companies with fewer than 250 employees and is an increase from 2017, when the figure was 61%. [ii]

This is despite over two fifths (45%) believing that the biggest threat to their business would be if senior executives leave their organisation.

Three in five (62%) SME leaders also admit to not having their own exit strategy. However, the younger generation of UK SME owners seem to be more organised when thinking about their eventual departure. The research also revealed that over half (56%) of those aged 18-34 having a succession plan in place.

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For business leaders of all ages who have already planned their exit, the most common ‘out’ is liquidation (29%), followed by handing over the reins to other senior colleagues (25%) or family members (23%), and this is likely to happen two to five years from now.

Top 5 ways of departure for business leaders 

Ways of departure% of SME leaders
Liquidation29%
Handing over the reins to other senior colleagues25%
Handing over to other family members23%
Selling the business to another company21%
Sell to a private equity firm or other investor16%

 For bosses who haven’t planned their departure, a third (33%) say this is because they don’t ever plan to leave the business, with over a quarter (28%) saying they are currently focusing on building the business. Furthermore, a quarter (25%) admit that their departure is too far in the future to plan for now.

Carl D’Ammassa, Group Managing Director, Business Finance at Aldermore, said: “For UK SME leaders who have planned their own departure, our research tells us that on average, they aim to leave their company in just under four years’ time. What is troubling is that there are fewer senior executives with formal business succession plan compared to a year ago.

“Running a business can be very time consuming with ongoing demands from customers and staff. These challenges exert substantial pressure on leaders, so it is vital that a succession strategy is planned out to ensure businesses across the UK do not suffer when changes to key executives occur.”

[i]SMEs figure – calculated using Federation of Small Business statistics that say the UK has 5.5m SMEs (2016 figures). Aldermore Future Attitudes research showed that 64% of SMEs do not have a succession plan. 64% of 5.5m = 3.52m

[ii] Research conducted by Opinium Research between 13 and 21 February 2017 with a nationally representative sample size of 1,003 senior decision-makers at UK SMEs.

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