November 3, 2009Underperforming superannuation and weakened retirement income prospects are prompting a large number of business owners to delay their retirement and re-consider succession management strategies.
According to
PKF Chartered Accountants & Business Advisers’ second annual Business & Population Monitor, a combination of the GFC, halved concessional contribution limits and temporary cuts to the government co-contribution scheme are affecting the retirement plans of some baby-boomers.
PKF Enterprise Advisory Partner Andrew Kesik says business owners are at risk of intensifying the ‘Prince Charles effect’, by leaving many who had been waiting for retirements to clear the path to their promotion waiting longer than they had planned.
“Many business owners who had been looking to build their super nest-eggs now see themselves as having no choice but to continue working in order to rebuild their assets so they can support themselves through retirement,” Kesik says.
“This muddies the waters in terms of succession planning, as employees who had been seeing the business owner’s retirement as a means to a promotion will now have to wait,” he says.
According to Kesik, poor company performance is also contributing to business owners remaining longer with their companies.
“Although the economic downturn in Australia has been less severe than many other countries, the GFC has still brought significant implications for many Australian businesses,” he explains.
“Companies in the professional services sector such as law firms and accounting practices have experienced a much weaker period of demand, while businesses in the finance and retail sectors will feel the longer term impacts of the GFC even more. Other sectors in which businesses have also suffered as a result of the downturn include manufacturing, the travel industry, and also the commercial property sector.”
Fallout from the GFC on business owners’ succession plans is expected to exacerbate what has already a problem – the rising age of business owners in Australia.
Currently, 33 percent of SME business operators are aged over 50, while only 9 percent are aged less than 30.
“While some businesses’ succession management plans may be impacted by delayed retirements, conversely, other industries will likely be hurt by a wave of retirements within the next 10 years,” Kesik says.
The education, utilities and public service sectors employ a significant number of older staff, with at least 40 percent aged 45 or over and 15 percent aged 55 or over.
“These demographic findings highlight the importance of sound succession management planning. Business owners who can successfully build a workforce covering a wide spectrum of demographic make-up are least at risk of issues relating to succession.”