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Strategy, Business, Business Succession - 7 min read
Over the years, business owners put an incredible amount of time and effort into their work. At some point, all business owners start to think about transitioning to retirement. That might mean reducing the amount of time spent with the business, turning the business over to an existing partner, or perhaps even selling the business to a complete stranger.
This transition can be difficult for many reasons. After all, no one knows the business like you do, and finding someone who has your same passion for it can seem impossible.
That’s where business succession planning comes in. With effective succession planning, you can take the time you need to choose a successor, train that person thoroughly and make sure that all aspects of the business have been considered: finances, taxes, human resources, compliance, stakeholders and more.
Should you use an adviser in business succession planning? In this post, we’ll address issues that can help you make that decision.
The business world is full of stories illustrating how poor succession planning can lead to disappointing results. Unfortunately, it's not a case of hitting 'control, alt, delete' to simply restart the process. The following are a few examples of common business succession planning problems.
Succession plans that ignore the business’s vision can suffer from inertia. You’ve been working toward specific goals, and your business has grown up around those goals. You may not even realise that your systems, processes and hand-picked employees all help you in the achievement of the goals set according to your vision, but they do.
If that vision is ignored in the succession planning process, your business may suffer in the long run. New management may not understand where the ship was sailing and may drift off course.
What happens when a family member tries to take over the family business and it’s just not a good fit? This is a common problem that results from poor small business succession planning, and it can be extremely costly, both to the business and to family relationships.
If this hiccup is a possibility for your business, you can use your succession planning to preempt a similar problem. For example, you could create a buy/sell agreement that would give the owner the option to buy back the successor’s share at a set price if the situation won’t work out long term.
Some business owners create a succession plan that seems to meet their goals for competent leadership, but they don’t think about how the succession plan will work with their personal tax situations.
If your succession planning doesn’t integrate elements from your Will, your retirement and Aged Care plans and financial provisions for your loved ones, your family could face tax challenges in the future.
The above problems illustrate just a few of the issues business owners and their families face when business succession is poorly planned.
Here at Altus, we look at succession planning as an integral part of running a business. Planning for the exit of key individuals over time is essential for a business’s continuity and the maximisation of its value.
A third party can often detect issues that are difficult for people to see from the inside, and we have the expertise to guide you through a host of complex issues like funding, shareholder and buy-sell agreements, taxation and transaction planning, organisation and structure, and ultimately the execution of your succession plan.
Why invest in the services of an adviser to help you with your business succession planning? Effective, carefully crafted business succession plans can help with the following:
Not only can conflict injure the harmonious environment you’ve created in your workplace, but it can also put your business’s financial health in jeopardy. Unfortunately, conflict often leads to the loss of valuable employees, and this can have a serious negative impact on your bottom line.
When you choose a business successor early on, you can have an opportunity to train him or her your way. This helps you to know that you’ve left your business in good hands, and it gives your successor a solid start. When your successor is well-trained, your business can continue to grow throughout the transition instead of stagnating while your new leadership learns the ropes. A business succession expert can be invaluable in reviewing your potential successors.
You never know what life will bring, but with an effective succession plan, you can rest assured that your business can continue to operate even if you’re not around to lead it. Your business doesn’t have to go through turmoil caused by emergencies if you’ve planned well.
If you’re ready to talk with an adviser about your business succession planning, get in touch with us at Altus. Our experts can discuss your situation and make recommendations about how to proceed. We look forward to working with you.
Set your business on the right path with this simple guide.
Make sure you’re on the right track with this online checklist.
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