New research by the University of New England has found that protecting substantial investments in existing businesses through effective exit strategies is critical to economic growth and often overlooked.
According to Associate Professor Bernice Kotey from the UNE Business School successful exit enables business to continue with minimal disruption and provides the existing owners with financial returns on their investments.
“The continuation of small businesses in regional Australia is especially important as they contribute to sustaining regional and rural economics during downturns in the resources sector,” A/Prof Kotey said.
A/Prof Kotey investigated enablers and barriers to business exit planning among small business owners in regional Australia, specifically Armidale NSW.
“Regional location is a major barrier to successful business exit,” A/Prof Kotey said.
“Other barriers include competition from large retailers, online shopping, inadequate support from local council such as unreliable forecast of economic conditions, crime rates and lack of access to medical and financial resources.
“These barriers limit the success of financial exit strategies such as selling the business, pushing owners to terminate operations and forego capital returns from their investments.”
Despite the barriers imposed by the regional setting, some business owners have made successful exits.
“Early exit planning is an important enabler,” A/Prof Kotey said.
“Also important are identification and grooming of successors, access to vendor finance, brokers and accountants, and a good reputation within the community backed by solid business systems.”
While business exit is critical to recouping the owner’s capital in the business, building retirement savings and investing in other entrepreneurial ventures, it also has financial consequences for communities as well as governments i.e. financial security of retirees.
“We need action in areas such as early exit planning among business owners, training in exit planning by industry bodies, attracting big businesses to regional towns, infrastructure and amenities development by local government, and provision of reliable data for effective planning to contribute to national development.”
The study was funded by the Institute of Public Accountants and is published in the Australian Geographer as Business Exit Planning among Small Business Owners in Regional Australia.