71.1% of Companies See Business Succession as a “Management Issue”


~ Business succession implementation has positive impact

for 30% of companies after 5 years ~

In July, the Small and Medium Enterprise Agency formulated a “5-year Business Succession Plan,” which assumes about the next 5 years as a business succession support focus period. To ensure that Japan’s economy continues to develop, it is essential to continuously sustain and develop companies and to convey employment, technology and goodwill to future generations. Meanwhile, it is often pointed out that business owners are getting older and successors are hard to find.

Therefore, Teikoku Databank has conducted as survey of corporate opinions regarding business succession. Note that this survey was conducted in conjunction with the October 2017 TDB Trends Research.

*Survey Period: October 18 - 31, 2017; Companies Surveyed: 23,235; Valid Responses: 10,214 (Response Rate: 44.0%).

*Details of this survey can be found on the dedicated Economic Trend Survey HP (http://www.tdb-di.com/)

Survey Results (Summary)

1. With regard to what companies are thinking in terms of business succession, more than half of them (57.5%) said they “see it as a management issue.” With the 13.6% of the companies that said they “see it as a top priority management issue”, about 70% of companies see it as a management issue. 18.2% said they “don’t see it as a management issue.”

2. When asked whether they had a business succession plan, the top answer (29.1%) was “there is no plan.” Followed by “there is a plan and it is moving forward” (22.9%), and “there is a plan, but it has not been initiated yet” (21.3%), it means that 44.2% of companies have plans. 14.2% of companies said that “business succession has already been accomplished.” The percentage of companies moving forward with such plans increases as their presidents are older, but is lower for presidents in their 80’s than for presidents in their 70’s.

3. The most common reason given for “there is a plan, but it has not been initiated yet” and “there is no plan,” was that “there is still no schedule to hand over the business” at 35.8% (multiple responses), followed by “no successor has been chosen” (35.2%), “doesn’t apply to our company (don’t feel the need)” (18.3%), and “there are concerns over the future viability of the company” (16.9%).

4. While 26.0% of companies that said “business succession has already been accomplished,” said “it had a positive impact” a year later, over half (55.9%) said “it had no impact.” After 5 years, companies that said “it had a positive impact” rose to 30.8%, while “it had a negative impact” dropped to 4.9%.

5. The top answer regarding what is needed for smooth business succession was that the “current president and the candidate successor share a common perspective” (60.4%, multiple responses), followed by “preparations for an early and planned succession” (46.3%), “appropriate understanding of management conditions and tasks” (45.7%), and “selection of a successor at an early stage” (42.7%).

Appendix

1.Research Subjects(Companies Researched 23,235; Valid responses: 10,214 ; Response rate: 44.0%)

2.Research Items

*Business Confidence (current, in 3 months, in 6 months, in 1 year)

*Business Conditions (sales, purchasing and selling unit price, inventory, capacity utilization ratio, number of employees, overtime work hours)

3.Research Period and Methodology

Internet-based survey conducted October 18 – 31 2017

The explanation of the Economic Diffusion Index

Research Purpose/Researched Terms

TDB Economic Trend Research (started from May 2002) is a monthly statistical survey conducted for over 20,000 nationwide corporations on their general business activities including the current condition and future outlook of the industry business performance and operating climate. The primary purpose of such a survey is to assess the current state of Japan’s economy.

Selection of the Subject Corporations

Companies of all sizes in all domestic industries are eligible to participate in the survey.

DI Formula The DI (Diffusion Index) is calculated by attaching a number (in parenthesis in the diagram below) to each of seven possible responses. Then multiplying the percentage of each response by the appropriate number, and adding the results.

A DI over 50 is in the range of “Good.” A score under 50 is “Bad.” The number 50 is the dividing point (“Neither Good or Bad”). All numbers are rounded off to the hundredth. It should be noted that no weight is given to a company’s responses based on its size. Calculations are made according to a “one company, one vote” rule.

.

For example, all corporations rated ‘Very Good’.

DI=6/6x100(%)=100

All corporations rated ‘Neither Good nor Bad’.

DI=3/6x100(%)=50

Size Classification

#JapaneseEconomy #CorporateAttitude

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