Management
Issue No. 44 - December/January 2008
Skating on thin ice without a plan
by Mr Kel Spencer
Australian business owners are acknowledged for their hard work and the immense contribution they make to the nation’s economy. However, a Royal Melbourne Institute of Technology (RMIT) study in 2006 revealed that 83% of business owners do not have a formal business succession plan in place.
With such a high percentage of business owners failing to take business succession planning seriously then they are really skating on very thin ice. Following are additional important statistics from the RMIT study :
• $3.5 trillion in family businesses will change hands in the next 10 years.
• 60% of Australian businesses are expected to change ownership in the next 6 years.
• 58% of business owners are over age 50.
• Only 9% of businesses have any Business Succession Protection.
Far too many business owners believe that they are immune, bullet proof if you like, to illness, accidents or even death. As a result they have no idea of the financial ramifications such a contingency will have on their business - This is called INVOLUNTARY business succession.
Other frightening statistics below highlight the chances of death, total and permanent disability (TPD) or a critical illness (trauma) occurring to the partners of a business.
Probability of Death, TPD or a Critical Illness Occurring Before Age 65.
Besides death, other unforseen and unexpected medical events such as a heart attack, stroke, cancer or even the inability to ever work again as the result of permanent disablement can have a cascading adverse impact on the financial viability of the business, fellow business partners and their families.
Fortunately these events can be covered by the incorporation of a risk protection solution into the overall business succession planning. This then provides a funding strategy for the business owner when needed most and it also guarantees the business with stability and financial certainty. All business owners sh...
