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How New Technology is Changing the Role of an External CFO

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Business Succession - 6 min read

What will happen to your business when you retire? Do you plan on selling it? Will you hand it down to a child or other family member? Do you want to turn it over to someone you train over the next few years?

For many business owners, the act of creating a succession plan seems overwhelming, especially in the face of daily operations, marketing strategy and turbulent times due to COVID-19.

But succession planning helps you to take control. Not only does it guide you through the actual transition, but it also helps you to solidify your mission, train your best talent and strengthen your position today.

In this article, we’ll look at twelve tips to successful succession planning. Our business experts have helped many Australian businesses through this process, and we’re ready to help you as well.

 

1. Review Your Business Strategy

If your succession plan veers from your long-held goals and beliefs, you’ll struggle to get everyone on board. That’s why it’s essential to review your business strategy before diving into succession planning.

By aligning your succession plan with your business strategy, you’ll reinforce the strong foundations you’ve constructed over the years, and that base will carry you into the future. If you’ve wanted to make changes to your strategy, now is a great time to do it.

 

2. Approach Development Like a Pipeline

New talent doesn’t spring up overnight. Businesses that effectively transact successions create a “pipeline” approach to development. Having several qualified people in the wings will ensure that you’re not left in crisis mode if one of them moves to pursue other opportunities. 

 

3. Integrate Succession with Recruitment

Take a holistic approach to your business by thinking about succession, even while you’re recruiting new employees. Does your business need short or long-term workers? How will each person fit in? What kinds of talent-stacks will assist your company in achieving long-term goals?

 

4. Be Transparent About Succession Plans

The last thing you want to do is create a feeling of uncertainty about the company’s future. Rumours about your retirement or the sale of the company could cause staff members to feel that the business and their jobs are in peril. 

Assure your workers by being clear in your communications, and explain that succession planning is a way of decreasing risk and ensuring the health of the business for the long haul. You have their best interest at heart; they need to know this.

 

5. Keep Your Plan Dynamic

Think back to the start of your business. People have come and gone. The market has changed. In many ways, it’s an entirely different enterprise.

As you work on your succession plan, keep the dynamic nature of business in mind. Be flexible, and recognise that the organisation will continue to morph, both before and after the succession is accomplished.

 

6. Consider All of Your Options

Even if you’ve never put forth a definite plan, you’ve probably had ideas about how succession will go. Try to resist the tendency to narrow in on these ideas before you’ve considered all of your options. Many business owners are surprised by how well a different succession strategy will work, but you’ve got to have an open mind to evaluate all of your options equally.

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7. Focus on Skills

It’s tempting to place all of your business hopes on a particular person or team. Realistically speaking, however, those people may not be around when you’re ready to exit, or they might decide to pursue a different course.

Instead, focus on the skills necessary for keeping your business stable and prosperous. Teach and train your employees to develop these skills, and when you hire new talent, look for these competencies.

 

8. Consider Planned and Unplanned Events

Most people exit their businesses when they retire, but it sometimes happens that unforeseen events force a departure. Life doesn’t always go as planned, so it’s wise to be prepared for death and disability as well. Don’t leave too much up to chance. In many cases, insurance can help to protect the value and provide liquidity in such circumstances.

 

9. Think about the Tax Implications of Your Entity Type

If your succession plan doesn’t address tax implications for your business structure, your transition could encounter significant bumps in the road. Discuss possible changes in business structure with a business succession expert who can anticipate the tax implications of each type. It’s simpler to make entity changes now than when you’re going through a succession.

 

10. Face the Possibility of Customer Attrition

An essential but often overlooked succession issue is the problem of client attrition. Despite the successor’s best efforts, companies often lose some customers when the owner retires or dies. Plan for client attrition the way you would plan for other anticipated challenges. Those plans will mitigate the damage.

 

11. Start Planning Early

Waiting until it’s too late is one of the worst mistakes businesses make in succession planning. Even if you don’t plan to exit your company for many years, start planning now. Your plan will guide your decisions and help you to mould your successor.

 

12. Leverage Third-Party Facilitating

A third-party succession facilitator is invaluable when you’re creating a business succession plan. You have excellent ideas, and you know your business inside and out. Additionally, you understand the strengths and weaknesses of all the key players on your team. The third-party facilitator understands the tax, financial and legal considerations of your planning and can help you to navigate policies and regulations. Together, you can create a custom succession plan that allows you to achieve your goals. 

Get in touch with us at Altus to set up a consultation with one of our business succession experts. Whether you’re setting your retirement date or planning for decades in the future, we can help you to navigate the process.

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