113,000 directors over the UK retirement age of 66 are still running their businesses, as many fail to sell their businesses before their planned retirement, says accountancy and business advisory firm BDO LLP.
The BDO research, based on an analysis of 730,000 directors on the boards of UK SMEs, reveals that 15% of business directors are aged over 66, with 10% aged over 70.
And with many lifestyle and family-run businesses in the UK catering equipment sector, this statistic could be particularly pertinent to them.
Whilst an increasing number of entrepreneurially-spirited directors want to carry on working well beyond the traditional retirement age, there are others working for longer than hoped as their plans to exit have not yet come to fruition.
The sale of a business can take much longer than individuals expect – it can take on average nine months to sell sub-£25m businesses, says BDO. If an owner is required to restructure a business to make it more attractive to buyers, it can potentially take much longer. Significant organisational change takes time to implement and means it may be years before a business is in a position to be sold.
By not sufficiently planning ahead, many directors are also forced to sell their business at a lower price than they originally planned for. Handling and planning the sale well in advance of the planned date of retirement can ensure owners get the best possible price for their business.
Mark Lamb, business advisory partner at BDO, said: “Many directors face working well into their 70s and that’s not always out of choice but because they have failed to sell their business.
“Businesses can really benefit from retaining the expertise of their most senior directors but most would prefer to do that through a non-exec or consultancy role.
“If a business owner can’t transition out of a company, then the years of building up a business to enjoy a comfortable retirement can actually end up with a director working well into that retirement. An exit strategy should be part of an owner’s business plan even from the beginning.
“Owners can risk losing value in their business when they go to sell if they have not sufficiently planned things in advance. Planning allows for any unexpected bumps down the road and ensures they get the sale price they are looking for to have a comfortable retirement.
“Selling a business can be a complex and lengthy process, so getting advice on what options are open is the best way to secure the best possible outcome.”
BDO adds that to ensure a sale is as tax efficient as possible and profitability is not lost, business owners should consider their businesses’ current tax arrangements. This not only includes using available tax reliefs such as Entrepreneurs’ Relief and Business Property Relief, but also using a trust to reduce Inheritance Tax bills if handing down a business to a relative.