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Welcome back everyone. In the sixth and final part of my blog series, I want to discuss something that affects all of our financial journeys: Superannuation. Perhaps you’re concerned about your retirement savings? Or maybe uncertain about how to make the most .....

Business Succession - 7 min read

People procrastinate creating their succession plans for plenty of reasons: they’re too busy, they don’t want to tackle a big project, they’d rather not make decisions for the future. But there’s one hurdle that can seem impossible when it comes to succession planning.


What if there is no one to succeed you?


This may happen in a small family business, but it can also occur in larger firms. If you decide not to create a succession plan, you’re essentially deciding to let the company dwindle when you leave. It’s that simple.


Before we look at ways to manage this situation, let’s look at a few scenarios that might lead to a lack of a successor.


No one in the family is interested

When you’ve put your heart and soul into growing a family business, it can be discouraging to realise that no one in the family wants to succeed you. They may all have plans and careers of their own. In some cases, you might have family members who still work for your business but who don’t want to be in charge.


No one in the family is qualified

On the other hand, you may have members of your family who would like to succeed you, but they don’t have the skills or experience to be successful. One man faced this situation when his nephew approached him about taking over the family’s real estate business. While the business owner appreciated his nephew’s interest, he knew the younger man didn’t have the skills or experience to step into his shoes.


No one currently in the company seems to be the right fit

Even if the family isn’t involved, succession can seem more comfortable when someone you know well takes the reins. But what if no one in the company seems right for the job? Is it really necessary to look outside the firm for a successor?


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Today you may not be able to see the path forward, but by taking the following steps, you can plan your company’s succession, even if you don’t currently have a successor.


Establish a Timeline

Your retirement might be three years or thirty years away. Regardless, you should have a good idea of when you’ll want to move on. Even if you never want to retire fully, you ought to have someone in place who can take over if you become incapacitated.

By starting your succession planning with an established timeline, you can narrow your list of successors, institute transition periods, and impose accountability on each step of your process.


Focus on Skills Instead of Relationships

Friendship and family relationships often impose themselves on your decisions when it comes to business succession. Instead of thinking about these relationships, consider where you want the business to be in five years.


When you have a clear vision of your company’s future, think about what kinds of skills and experiences will help the business to get there. For example, if you’d like to see the business expand into Asia, you might want to find a successor with international experience. If you’d like to see your business develop innovative new products, you may need to tap a leader with significant research-and-development achievements.


Find the Right Fit

Once you have a clear vision of the new leader’s role and function, it’s much easier to seek candidates. By defining desirable traits for your company’s future leader, people in your sphere of influence can start making recommendations. Your business advisers may also know people who might be a good fit, or they can ask those in their networks for suggestions and endorsements.


You might be surprised how much easier it is to seek a successor based on traits rather than on relationships. When personal feelings and relationships take a backseat to skills and experiences, business owners often feel a burden lifted from their shoulders.


You may find your successor in any number of places. They may have been working with suppliers or even competitors. You may have found them through mutual connections or even through an online listing or recruiter. Eventually, you’ll find the right fit, and you can begin the transition.


Start the Transition

Ideally, you’ll be able to transition control of the company at a measured, even pace, slowly turning the reins over and giving your successor challenges one at a time. Since we don’t live in an ideal world, you should be prepared with contingency plans.


For example, some business owners have to exit the company suddenly due to an accident or injury. When this happens, successors must rise to the occasion and do the best they can. The more work you’ve put into your succession planning, the more likely it is that your successor will thrive in such a circumstance.


A business succession plan based on best practices makes provisions for risk management, personnel changes, the retirement of the previous owner, valuation and buy/sell agreement information, communication of the strategy to all stakeholders, and legal considerations. With so many aspects of the business carefully managed and considered, your successor will be well-positioned to succeed and take the company where you intended it to go.


Seek Expert Assistance

Expert, outside help is invaluable when it comes to succession planning. You’re busy with the day-to-day operations of your business, and you may not have the time to consider all the logistical, legal, and financial factors affecting your succession. To learn more about succession planning, or to speak with us about any other business topic, set up a consultation with us at Altus. We’re here to help you succeed.


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