Succession planning for business creates an organised and undisturbed shift of ownership and management for those times when an owner leaves their business. Leaving can occur voluntarily, in cases of retirement for example, or involuntarily, in cases of incapacitation or death. While it may be difficult and unpleasant to consider these circumstances it is necessary to plan for such contingencies. A well-developed succession plan will benefit everyone involved since it provides clear directions for when succession takes place and who takes over management and ownership.
Taggart & Partners can provide you with professional business exit planning advice and assistance in helping you develop your business to its fullest. We welcome all enquiries and hope today’s article helps you make an informed decision about your business.
Succession Planning for Business – Key Considerations
Organising your succession
99.8% of businesses in Australia are classified as small or medium-sized and make a tremendous contribution to its prosperity. Therefore, succession planning for business owners is vital to keeping their business operating seamlessly and one of the first points to consider is who will succeed them. Create your succession plan as soon as possible and consider making it part of your business plan so that your clients and operations won’t be disrupted.
Selecting your successor
You need to decide who will manage and own your business upon your departure which means deciding on a family member, employee, or another owner to take over. You will need to choose someone with the right skills and desire to operate the business. Family business succession planning is similar to succession planning in other businesses but the needs and desires of all the family members involved must be considered.
Family business succession planning
When considering the future of your business and your family members involvement in it, factor these questions into your plan.
- Is it possible for the business to stay in the family?
- Is there someone who wants to take on the responsibilities of the business?
- How prepared are you to help with the transition?
- What are your family dynamics like?
Another factor to consider is involving a professional advisor to help prepare the family for the change. Such an advisor can help keep the proceedings professional and operating smoothly.
Details in your plan
Thorough succession planning for business entails covering the financial, legal, and operational aspects of your organisation. Discussing the following ideas will help you create a well-formulated succession plan.
- Do you know the market value of your business?
- What type of insurance is in place in the event of your death or incapacitation?
- How much income do you need?
- Are you selling or gifting your business?
- Do you need to transfer or alter any legal documents?
- Is a legal document needed to stipulate the terms of your succession plan?
- After you leave, will there be changes to the legal structure of your business?
- When do you plan to leave?
- What will your successor be responsible for?
- Will you retain some involvement in the business and if so, what are the specific details?
- Who will cover your most important positions?
- Are your employees, suppliers, and customers aware of what will happen after you leave?
Involving a professional business advisor is important in managing this process but you will also want the input of your family and significant members of your business, particularly those who might succeed you.
Committing to your plan
Once you have established a successor and established a timeline make sure to revisit your plan as needed. Remember, ideally you have established this operating procedure well before it is needed. Keep your plan up to date, make changes as warranted and communicate your decisions to everyone involved in your business. Succession planning for business owners can be an emotional and difficult time but having a plan in place is superior to letting things wait until the last minute.