5th September 2006 
 
The succession planning crisis looming with the retirement of a generation of baby boomer small business owners may be alleviated by Generation X and Y, with nearly a quarter of surveyed 18 to 34 year olds seriously considering buying a small business in the next ten years, according to a Newspoll launched today by the Institute of Chartered Accountants in Australia.  
 
The poll of 719 Australians nation-wide reveals that 17 per cent of all respondents would seriously consider buying an existing small business in the next 10 years, with four per cent saying they are very likely to contemplate buying (see table 1).  
 
Encouragingly, the survey reveals that the greatest interest shown in the SME marketplace by any one demographic is that of 18 to 34 year olds.  
 
“It is positive to see from the Institute’s survey that there is interest being shown from Generations X and Y to enter into business,” said the Institute’s Small to Medium Enterprise (SME) Chairwoman, Sue Prestney. “Significantly, 23 per cent of 18 to 34 year olds surveyed said they would seriously consider purchasing a business rather than starting their own,” Ms Prestney said.  
 
The Institute’s findings challenge recent commentary about a lack of interested successors, offering hope to those entrepreneurs looking to retire.  
 
“Whilst not arguing that exiting business owners can become lax in their planning for a business handover, the Institute hopes to broaden the discussion on succession planning to incorporate the interests of those people looking to buy a small business,” said the SME Chairwoman, Sue Prestney.  
 
“It is crucial that attention is given to encouraging and assisting potential successors into the small business sector, if we are to ensure a smooth generational handover,” Sue Prestney argues.  
 
Significantly, of the respondents who expressed a disinclination for buying an established small business, only five per said this was because they would rather start their own enterprise, suggesting that there is a preference in the market place to purchase an existing business rather than starting from scratch.  
 
Other reasons cited for being unlikely to become an entrepreneur included a lack of money or capital (20%), satisfaction with current career path (27%), the perceived risk and insecurity associated with running a small business (8%), a lack of skills or experience (5%) and a lack of sufficient return on investment (4%) (see table 2 below).  
 
To encourage potential successors into the small business market, the Institute of Chartered Accountants has put together the following advice for purchasing an existing business:  
 
Advice for Buying a Business:  
 

• Do your homework; understand why the current owner is looking to sell, as well as how long the business has been on the market.
 
 

• Find out everything you can about the market and the industry that the business operates in, its products and competitors.
 
 

• Obtain accurate figures on historical and projected performance; this can include data from past tax returns.
 
 

• If the asking price includes goodwill make sure that the goodwill is not personal to the current owner (and therefore likely to disappear with the current owner).
 
 

• Make sure you understand what really drives the profits of the business. Do a SWOT analysis so you understand what the risks and potential the business has.
 
 

• Get professional advice (from a CA) in regard to the valuation of the business.
 
 

• Consider how the business succession will be implemented. Particularly if it is a family business succession, will the owner continue to be involved in some capacity? How will knowledge and relationships be transferred? How will any payments be structured?

• Currently own a small business 21%
 

• Likely to consider buying 13%
 

• Very likely to consider buying 4%
 

• (Total likely) 17%
 

• Unlikely to consider buying 59%
 

• Uncommitted 3%

• Lack of money/ capital 20%*
 

• Content with current employment situation 27%
 

• Too old or too near retirement 14%
 

• Too much hard work/ “hassle” 11%
 

• Perceived insecurity/ risk of a small business 8%
 

• Never considered the possibility 7%
 

• Too much responsibility and pressure 5%
 

• Prefer to start, rather than purchase a business 5%
 

• Lack of skill or experience 5%
 

• Lack of sufficient return on investment 4%
 

• Not interested or not inclined 19%