One-in-five (20%) small and medium-sized enterprise (SME) owners plan to sell part or all their business within the next two years according to a new study conducted on behalf of Handelsbanken Wealth & Asset Management.
An additional one in ten (11%) respondents expect to downsize their businesses over the same period. Of these, a third (31%) blame rising costs, 18% cite performance-related issues and a further one in six (15%) need to release liquidity to deal with the cost-of-living crisis.
But while rising costs and profitability were among some of the catalysts for selling up or making a change, the research also shows that many owners are motivated to sell all or part of their business for positive reasons. 40% plan to release liquidity to invest in other business ventures, for example. Just six percent said they are planning to sell their entire business within the next two years, with 20% citing retirement as the driving factor, and a further 20% having to do so due to an absence of family succession options.
Despite the multiple challenges faced by many SMEs, most company owners (52%) have no plans to change their firm’s size or ownership status. Furthermore, one in six (16%) are considering scaling up their operations within the next two years, indicating a welcome degree of optimism among this business segment.
Christine Ross, Head of Private Office (North) and Client Director at Handelsbanken Wealth & Asset Management said: “Making changes to your business – whether you’re expanding, downsizing, selling or starting something new – can be a very exciting time, but it can also be very stressful. If you’re releasing money from your business by selling all or part of it, it can feel like a big weight off your mind when the process is finally concluded. However, there’s also the question of what to do with the proceeds of a business sale, as you enter the next chapter of your life."
“This is a good time to take stock of your situation, and focus on your goals for the future. It’s important to remember that many of the tax advantages you enjoyed as a business owner may no longer be available to you, so consider taking professional advice as early as possible to help work out the best options for you."
“For example, setting up a family trust prior to your business sale could make use of inheritance tax reliefs, if this meets your financial and estate planning objectives. You might also want to make the most of allowances around ‘gifting’ money to help the next generation, if it suits your personal situation, or invest in financial markets an effort to protect the value of your capital against inflation."
"Whatever you choose to do next, make sure you understand the risks and potential rewards involved.”