Business Succession of SMBs in Japan (1)
The number of small and medium-sized business (SMMs or SMEs) in Japan is decreasing, primarily due to the ageing of business owners and low rate of founding.
Definition of SMBs in Japan
According to the above definition, 99.7% of business entities are small and medium-sized businesses, and they employ 70.1% of total working population in Japan. As the graph below shows, the total number of small and medium-sized companies has decreased from 4.8m to 3.6m from 1999.
(Source: Whitepaper on Small and Medium-Sized Businesses, 2019)
Most frequent age cohort of SMB business owners has shifted from 47 in 1995 to 69 in 2018.
(Source: Whitepaper on Small and Medium-Sized Businesses, 2019)
The forecast shows that the age of business owners in 2.45 million companies will exceed 70 in 2025.
Among 2.45 million companies, about half of them (1.27 million companies) do not have successors (or not decided their successors yet.) This means 1/3 of the total number of companies in Japan (3.8 million) do not have successors.
Business succession to family members has declined significantly since 1980s, resulting in the increased ratio of ‘3rd party succession’ (i.e. employee buyout, recruitment of management from outside of the company and M&A)
(Source: Whitepaper on Small and Medium-Sized Businesses, 2014)
Overall number of M&A transactions in Japan has increased in recent years, and this trend will continue as more SMB business owners seek M&A as a viable option for their business succession.
SMB owners used to avoid M&A as a means for business succession. As the statistics show, their mindset seems to have changed, presumably due to the lack of viable successors in their family members.
(Source: Whitepaper on Small and Medium-Sized Businesses, 2018)
Tommy Global Consulting provides business consulting services to the specific needs of foreign companies newly establishing or expanding their operations in Japan. Our consulting services cover a wide range of client needs including (1) investment strategy and business planning, (2) establishment of operations in Japan, (3) M&A, and (4) operational support and PMI
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