As the country grays, a growing number of small and midsize businesses across Japan face the risk of closure due to a lack of successors.
The problem has recently become more visible in Hokkaido’s northeastern Okhotsk district, where the number of heirless small and midsize enterprises seeking successors or support is on the rise, highlighting the need to boost support for ailing businesses and initiatives aimed at helping them survive.
Between April 2019 and March 2020, 108 local businesses in need of a successor to manage their business sought consultations with Kitami Shinkin Bank, a local community-based credit union. The number of firms was twice that seen five years ago.
“When you’re over 80, you never know when you’re going to collapse, so I wanted to get everything sorted and finish off this job while I still can,” said Nobuharu Kasahara, 81, who shut down his small soap manufacturing company in August 2019.
Kasahara founded Miyaden Kagaku Kogyosho in 1978 in the city of Kitami, having developed a method to quickly recycle waste oil into soap. His environmentally friendly product soon gained popularity in the region and was used widely, at school cafeterias for example.
Over the years, Kasahara tried to find a successor, but to no avail. Then help came from a local welfare group, Kita no Daichi. Earlier this year, having learned that Kasahara had folded his business, the group took over producing the soap and appointed the 81-year-old as its adviser.
According to an estimate by the Small and Medium Enterprise Agency, among 2.45 million business owners who will be age 70 or older by around 2025, about 1.27 million don’t have anyone to whom they can pass on their businesses.
An October 2019 survey by Teikoku Databank Ltd., a Tokyo-based private credit research agency, showed that 72.9% of enterprises in Hokkaido didn’t have a successor — the fifth highest number among Japan’s 47 prefectures.
Problems faced by elderly business operators were also reflected in another study conducted in 2017 by the Kitami Chamber Commerce & Industry.
According to a survey by the group, based on 311 responses from business owners in Kitami, around 80% of business operators were hoping to find or were considering looking for the right person to take over their business. But the same survey also showed that 61.5% of them hadn’t yet found anyone.
The rapid aging of the population in the region contributes to the problem. According to the Kiitami branch of Teikoku Databank, the average age of business owners in the region in 2019 was 61.5, exceeding the national average of 59.9 and even Hokkaido’s average, which stood at 60.7. Smaller business owners with little capital tend to be older in age.
However, many elderly entrepreneurs appear reluctant to ask their children to take over the family business, which often results in delaying succession.
To address the problem, Kitami Shinkin Bank launched a consultancy service in 2009 for local business operators in Hokkaido who are seeking successors.
“Many business founders don’t have successors, and most of them don’t know how to plan succession,” said Katsuhide Okamura, who heads a division providing financial aid for small businesses at the bank, explaining why it decided to introduce the support program.
In fiscal 2015, 54 operators of small businesses sought advice at Kitami Shinkin Bank, but the number has increased significantly since, and three years later exceeded 100. The bank has helped several dozen of operators find someone to take over their businesses.
Michie Tsunoda, an assistant professor at Sapporo University who specializes in succession planning for small and midsize businesses, says that young successors may help rebuild failing businesses with fresh ideas and new strategies that would be in line with the current market trends.
“I want business founders to start planning for succession early on so their companies survive,” she said.
This section features topics and issues from Hokkaido covered by the Hokkaido Shimbun, the largest newspaper in the prefecture. The original article was published Oct. 6.
In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.