KEY POINTS:
Medium-sized firms face a leadership deficit as their babyboomer owners search the thinner ranks of Generation X for their successors.
A survey commissioned by ANZ of privately owned businesses with turnovers between $5 million and $150 million found that 59 per cent were run by principals aged over 50, with 23 per cent over 60.
But while 63 per cent of them saw succession as an issue (up from 48 per cent in last year's survey) only 17 per cent had taken steps to address it.
And it tended to be seen as a problem rather than as an opportunity for a step change in the business, ANZ managing director Nigel Williams said.
Succession planning was all the more important because of a demographic "tsunami" on its way, he said.
Generation X - the 35- to 45-year-olds who should be the next generation of business owners - is much smaller in number than the babyboomer generation looking to retire, both because of lower birth rates and because of a higher proportion still overseas.
The survey found 42 per cent of owners had family members working in the business and almost as many (38 per cent) thought they were capable of taking over. But only 24 per cent believed they could afford to.
Forty per cent would consider selling to management, twice as many as last year, but only 18 per cent regarded that as financially feasible.
A large majority - 74 per cent - preferred a trade sale, up from 41 per cent last year.
The age profile of business owners not only makes succession planning an issue, it may also account for a gap the survey found between what they say and what they do about risk and growth.
Half said they had a strong appetite for risk and were not averse to increasing debt to pursue opportunities. Access to capital was generally not seen as a barrier to expansion.
But only a third would consider making a step change in the next 12 months to drive rapid growth, through such activities as a merger or acquisition or international expansion.
The frigid business climate might account for some of that caution: 85 per cent of the businesses were founded more than 10 years ago by their present principals and would therefore have weathered more than one business cycle.
"They may be more sensitive to the current tightening credit markets than those enjoying the exuberance of comparative youth," Williams said.
But the survey paints a picture of a sector reluctant to commit to rapid expansion even though the resources are available. While this might be understandable from an individual perspective, Williams said, it raised questions about the country's ability to seize the once-in-a-generation opportunity provided by the emergence of Asia and to achieve the productivity gains needed.
"We see these firms as the real engine room of the economy," he said.
Achieving the size they have required their owners to build up expertise which would be missed if it was abruptly lost to the enterprises concerned. So a staggered exit might be preferable to a clean getaway.
But at the same time consolidation could provide an opportunity for owners to grow wealth they left in the enterprise, as well as making it easier perhaps to expand overseas, he said.
It was important to get good advice and to make time for working on the business, not just in the business.
WHO'S THE BOSS?
* 59% of medium-sized firms are run by people over 50.
* 23% are run by people over 60.
* 63% of owners are concerned about who will take over.
* 17% have done something about it.
