A Succession Plan for your business can massively reduce financial and emotional stress and protect those you love most. Without one, you could be leaving your family, your business partner and business partner’s family and all your employees and their families in danger of having no income.
Why a Succession Plan is a must?
Why would you think of leaving your business if you’re doing well? You may wish to begin a new business. You may be moving to another state or country. As you get older, you may wish for more time and money for yourself to pursue other interests. You might want to pass on the business to someone else. That time may seem a long way off, so why the urgency to draw up a Business Succession Plan now?
An alarming situation is if you don’t get to decide the date of your departure. The circumstances would be stressful enough for everyone as it is, without having the business (and the financial wellbeing of all the families involved) suffer as a consequence.
There are many good reasons for drafting a Business Succession Plan as soon as possible. To ensure the future of your business, and to cater for loved ones, you need to plan for a range of possible exit scenarios. This is called a Business Succession Plan, and should be prepared by a professional service firm.
Related: Planning a Merger or Acquisition? Here are our top tips...
Related: How to exit your business on a high
Who will succeed to the business?
Who will be your successor? Like many business owners, you may want to pass on your share of the business to someone in your family, your business partner, a senior employee or another business owner.
Your successor needs two things above anything else:
- a passion for the business; and
- the skills to run it.
When should you create your Business Succession Plan?
It’s a good idea to develop a Succession Plan when you start out in business, and adjust it to circumstances as time goes on. Plan early, and plan often. According to Craig West, chief executive and president of the Australian chapter of the Exit Planning Institute, you should have started about two years ago!
It can take up to two years to get a business ready for sale, and to find the right buyer. Craig West says, ‘It takes 18 months to two years to exit successfully. If you do it quicker, you'll leave money on the table.’
So if you don’t have a Succession Plan in place for your business, you need to get started now. Succession Planning requires a wide range of skills. More than any single professional can provide. As trusted advisors, however, professional accounting firms with the wide range of different team skills can guide business owners through the Succession Planning process.
A well thought out and properly funded (that is, insured) Business Succession Plan will make sure the business can continue to operate as smoothly as possible, and conflicts between surviving business partners and spouses, avoided.
Like nearly all business documents, a Succession Plan needs to be kept up-to-date. Families grow and mature, employees come and go, and your plan needs to take all of that into account. There’s no point in planning to appoint a son who doesn’t want to work in the business, or a senior employee who has since left the business. Review your plan annually.
Related: Why your Business needs Succession Plan
Have you noticed our #FridayExpertTips... here's one that relates to #CorporateAdvisory
“A successful Merger & Acquisition starts with well-thought-out strategy and planning. In our extensive experience with Deal Advisory, the smoothest transactions have always been well planned.”