Con Foo, Rodney and Breen, John P (2009) Successful Exit Processes of SMEs in Australia. In: SEAANZ 2009, September 1-3, 2009, Wellington, New Zealand.

Abstract

Whilst it may be an idealistic notion that businesses will continue to grow and long outlast their founders, the reality is that most businesses have finite lives with the vast majority of Australian business start-ups ceasing to exist within fifteen years. The reasons for business expiration are essentially: failure, voluntary closure, and harvest. The nature of SMEs in Australia is that there are many start-ups and almost as many failures each year. Whilst there are significant studies on business cessation, there has been very little research focus on business exits (harvesting) that does not include business liquidation (voluntary or involuntary). The main aim of this research was to undertake an empirical study of Australian SME exits to identify the process that owners of SMEs undertake to execute a successful exit. A research framework for business exits was developed that consisted of a process with three overlapping stages: exit contemplation, exit planning, and exit execution. This study was based on an exploratory case methodology which focussed on the exit process undertaken by twelve Australian SMEs. From the results of the study the findings revealed that Australian SMEs undertake two types of exit process; one for reactive scenarios where owners responded to unsolicited offers from buyers, and proactive scenarios where owners prepare their businesses for an exit, identify potential buyers, and then execute an exit. Reactive exits are simpler and quicker to conduct than proactive exits. They are also less expensive to transact, less disruptive to their businesses, and because of their quick transaction time, pose a lower overall risk. The major management implication for exiting owners from this study is that exit preparation, not planning, is the key to achieving a successful exit. Preparation was identified to take two forms: deliberate or inadvertent. These activities contribute or build towards the business’s saleability by removing potential exit barriers and enhancing the businesses brand, potential, and profitability. For buyers of small businesses this study concludes that in cases of craftsman style owners, an exit is often not about the price. For these owners, exits coincided with waning satisfaction because of management complexity, changed lifestyle requirements, or simply, longevity.

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