Transfer failure is a recent phenomena affecting hundreds of small and medium enterprise (SME) owners all over the UK. An entire generation of business owners are vulnerable or have already been affected by this new occurrence, due to a shifting dynamic in the corporate climate businesses created by the baby boomers are struggling to be sold, or at least sold for the right value.

Ownership

A business transfer refers to the change of ownership of an SME, typically happening when a business owner is seeking retirement and wants to gain capital from their business to fund their retirement, while keeping the business open and running after they leave. A ‘transfer failure’ refers to a situation where the business either closes or is diminished by a sale. ‘Successful’ transfer is one that results in ultimate viability of the business and subsequent positive performance of the firm.

SME Survival

Only a relatively small percentage of family-owned firms survive within the family: around 5-15% of such businesses reach the third generation, so it is very likely that a larger company or even a competitor will seek to purchase a SME that’s on the market. Rather than sell to a competitor, some owners of SME’s will chose to liquidate the business instead.

SME owners who are forced to liquidate the business for whatever reason, either to avoid selling to a competitor or through pure desperation at unsuitable and low buyout offers from vendors sell everything (often machinery, buildings and stock). This allows them to take some capital from the company they have spent their life building. This also means staff lose their jobs.

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Community Impact

The loss of businesses that employ a percentage of workers in a rural or less built up area can have a huge negative impact on the immediate area, especially in a climate of limited employment options across the United Kingdom.

Vendors have to carry on working because there are no buyers and are struggling to sell their business, often meaning that owners are forced to carry on working well past retirement age, at a time they should be enjoying the successful legacy they have worked towards.

My Mission

This is the problem I am looking to tackle. A principled and ethical business buyout can save jobs and sustain the legacy of the ‘grey entrepreneurs’ who founded the businesses people have relied on for decades. Transfer Failure can have repercussions that are impossible to reverse.

One-third of UK small and medium enterprise owners have been identified as ‘vulnerable’ to age-related transfer failure, and this vulnerability affects an increasing proportion of the SME owners. There are no official statistics on business transfers, so it is difficult to know for sure how many SME’s are truly affected.

In the next blog post I will explain how this problem can be solved, and how beneficial a successful buyout can be for all parties involved.