Is your business successful? Great! What are you going to do when you are ready to retire, if you fall sick, or simply want to move on? Will you pass the business on to a family member? Sell the business?
A business succession plan is essentially a decision about who will lead your business into the future, and who will take ownership of it.
Now, you might be running a business that you love, and feeling young and invincible. Or perhaps you have a “young” business that is only just getting off the ground, and you don’t want to think that far into the future.
But you must think about it. The good news is, it does not need to be all that scary or difficult.
Why make a business succession plan?
It can be hard to plan for succession because most people do not want to think about a time when they are not in charge!
You might be avoiding thinking into the future – instead, you're just focusing on the here and now. You might be busy worrying about the current bottom line, the short-term future, and how to keep the wheels turning.
But your future self will thank you for thinking about it now.
The main reasons to have a business succession plan are:
- Enables you to plan ahead and anticipate what’s next – crucial for long-term success
- Creates a structure for training and development
- Ensures a fair price if looking to sell
- Allows leadership to cultivate a pool of talented workers who are poised to take over leadership roles as the business grows, changes and develops
What are your succession options?
A good succession plan allows scope for flexibility, while also taking into account the makeup of the business. Now is the time to set out the long term goals and a plan to make any transition as seamless as possible.
What are your succession options? Well, you could:
- Sell the business
- Hand the business down to your children
- Establish an employee share plan
- Plan a management buyout
- Simply close the business
- List on the stock exchange
- You could also maintain a connection as a silent partner or minority shareholder, or move into an executive-only role
A good succession plan enables you to walk away with the best deal for yourself and those left behind within the company.
Succession planning tips
The best succession plans allow time. Time for staff to adjust, management to transition, and paperwork to be sorted.
Here are our top 8 tips:
- Be proactive - you really need three to five years to get it right, to maximise the value, and to make sure the business survives.
- Gather all relevant company information including the date the succession plan was developed
- Ensure all financials are up to date. This will help with business valuation, including fair market value, investment value and liquidation value
- Identify current employees who might be potential candidates for future leadership or high-potential positions.
- Communicate with all those necessary, such as the board or management committee.
- Look to implement training programs and career development efforts to train high-performing workers if you think internal succession might the way to go, and look for external buyers. What type of buyer would you be looking for if you were to sell?
- Identify any legal documents that need to be considered, including contracts, partnerships, and other agreements.
- Try to implement some 'trial runs' if you can. Could you let a senior leader manage the business for a few months while you re holiday? Could you test the market for a buyer? This will allow you to spot any potential issues with your succession plan, and also how you truly feel about your strategy.
Get help today for a better future
The Profacc team has experienced business accountants and advisors that understand the complexities of running a business. We take time to understand the dynamics of your specific business, your goals, and strategic direction and enable you to achieve success.
Profacc Accountants & Financial Planning will help you implement strategies now in order to have a successful plan for the future - whatever that looks like for you.