HLB Mann Judd’s SME Research report 2017/18 found that only 54 per cent of business owners had wills in place, with less than one in three having taken broader estate planning steps despite the issue rising up to second place on the list of business concerns, up from fifth last year.
On the contrary, cash flow concerns have dropped from first spot in 2016/16 to fourth place this year.
Boutique accounting firm Matthews Steer, senior private client advisor, Anthony Sloan, said that while cash flow will always be front of mind for business owners, he has seen a growing concern over business legacy.
“It isn’t the business’ finances, competitors or how to transition worth to the next generation [that clients lose sleep over],” said Mr Sloan.
“It’s how to teach the next generation about the family business, its history and values, and how to educate them to preserve and enhance the legacy that’s been created.
“Who will ultimately lead the business, who will own it and how to transition wealth to the next generation are other key concerns.”
Further, Mr Sloan said that while there was a succession planning advice gap, accountants and advisers needed to be sensitive to their clients’ needs when approaching the subject.
“You’ve got to take time to understand the family dynamics because family business can be emotive,” said Mr Sloan.
“You’ve got to peel back the layers and understand what they want to achieve. Family values are important, they are an anchor, and a lens for the family as to whether decisions are aligned with their core values.”
“Every family is different — whether you are planning for a family member to take over the business, or an exit to provide financial security for each individual family member, you have to tailor your strategy to achieve that,” he added.
“It should protect every member of the family no matter what happens, be it divorce, illness, addiction issues, etc.”
Conversely, accountants themselves are not immune to estate planning issues, with close to 80 per cent of accounting firms not having a documented succession plan in place.
“If we're not thinking about what happens next in our business then what are we doing? We're just sitting on our hands going 'we're too busy'; we're always too busy but we need to think about what's next in the future,” said Practice Ignition global head of accounting and strategic partnerships, Trent McLaren.
“The average age for a practitioner was 55 in the accounting industry so there's a lot of change coming in the next couple of years but with all that change, we still haven't actually started planning for it at all.
“Have a chat to people around you, ‘what are you doing, what are your plans, oh you're leaving in 12 months’ time, what are you going to do with the rest of the business? Can I have that?’”
Jotham Lian is the news editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.