What Do SMBs Plan to do with the Business When They Retire?

SMB SaaS Survey

As part of the ritual of examining local commerce and SMB SaaS strategies, Localogy goes right to the source: SMBs themselves. How do they feel about marketing and operational software? What features do they want? And how has their hunger changed in a pandemic? This is all a moving target.

Localogy’s Modern Commerce Monitor (MCM) answers these website dynamics questions across SMB SaaS, which we preview in this Benchmark Bytes series. After examining the share of SMBs that are actively planning for retirement last week, we switch gears to dive into their actual retirement plans.

Specifically, what’s the plan for when proprietors reach that age? Will they pass along the business to a successor, close up shop, or some option in between? These decisions are rarely discussed, but impact every SMB proprietor out there. And collectively these decisions shape the SMB landscape.

Localogy members can access full charts and SMB survey reports. Non-members can purchase reports

Data Dive

Going deeper, a few insights jump out from these findings.

– The most popular SMB retirement plan (31 percent) is to turn the business over to a family member.

– That’s followed by 23 percent that plan to close the business, 22 percent that plan to modernize the business before selling it (to get a better price). 18 percent meanwhile plan to sell the business as is, and 6 percent have no idea what they’ll end up doing when the time comes…

– The leading sentiment for family succession stands to reason, as many SMBs are emotionally invested in their businesses.

– But keep in mind that this is aspirational. They’ll need a willing successor to run the business, which isn’t always easy to find.

– If we add up the various flavors of “selling the business” upon retirement (both modernizing and selling as is), that’s technically the most popular plan at 40 percent of responses.

– This stands to reason as there’s a financial outcome and no need to find a suitable successor to run the business.

– The fact that closing up shop had such a high response (23 percent) was surprising. This portends a high turnover rate for SMBs.

– The concept of SMBs closing up shop is also top of mind, as many were forced into early retirement in the Covid era.

– As we recently examined, the pandemic simply pushed up their retirement date, as many SMBs simply didn’t re-open.

– One effect of this is an accelerated phasing out of older businesses.

– That turnover cycle has in turn transformed the face of the SMB landscape, as it lowered the average age of SMBs.

– Many are more digitally savvy as digital natives.

– They’re also fire-tested in terms of operational and marketing chops required to survive from 2020 – 2022.

SMB SaaS Use and Purchase Trends, October 2021

Time to Shine

Stepping back, SMB online marketing – website-based or otherwise – continues to grow rapidly.  SMB SaaS startups and online services providers are correspondingly thriving as it continues to grow as a leading subsector of the broader SaaS universe. There’s a long-tail opportunity at play.

Meanwhile, new SMB SaaS users could represent permanent adopters. This is a concept that’s accelerated in the Covid era as SMBs are forced to boost their digital transformation. This sends them into the arms of SaaS providers to accomplish a range of marketing and operational functions.

We’ll return in the next installment to go deeper into Localogy original survey research. That will include SMB goals and success factors. Let us know what additional insights jump out at you from the above data. Stay tuned for more breakdowns in our Benchmark Bytes series.

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