Once you have tackled the initial challenges in establishing a business and making it successful, the question about business and personal succession planning should come to mind. However, statistics show that only 35% of businesses have a formalized succession planning process for critical roles. Stephen R Covey, the author of 7 Habits of Highly Effective People, famously said “Start with the end in mind”. This reminds us that as we take concrete steps in progressing towards our goals, we should always keep the eventual final outcome at the front of our mind. You can’t lose sight of the end goal.
Many of us would simply wish to retire and hand over our business to our children, others would like to sell the business for a high value and use the nest egg for a comfortable retirement. Whatever your plans may be, it is vital that when you leave, you ensure that the business can continue operating without you around. There is a saying that if your business can’t run if you aren’t there, then you don’t have a business, you have a job.
Be sure to align your personal retirement and lifestyle goals when you consider business succession. As a business owner, there are various ways you can profitably exit and here are some ideas:
Particularly for family owned businesses, passing the business onto family or selling the business as the two most popular succession choices, with 44% and 41% of business owners planning to opt into these pathways.
However, in considering your business exit, here are some things to think about to maximise value and if you don’t have these in place, now is the time to start:
In order to have grown your business into an asset that can be passed on, you will have needed to introduce systems and processes that your staff can follow so that you haven’t needed to be watching over their shoulder at every turn. Such systems and processes should be implemented well before business succession planning even takes places so that you can take time off knowing that the business will continue to run smoothly.
A saying I like is “If you don’t write it down, it never happened”. The last thing you want is for a new owner to keep calling you while you are on a tropical beach to ask you about every little nuance in the business that is locked away in your head. Make notes of the little things that may help the new owner. Is there a customer that tries to get away without paying on time if you let him? Is there a supplier that will get you out of a bind at short notice if you need materials?
These little things can make the difference between the after-sale period being smooth sailing or rough waters.
Have a chat with your accountant early in the sales process in order to ensure that you grasp the tax implications of how you will deal with the sale proceeds. The earlier you put tax strategies in place the better to ensure that you don’t have to pay more tax than you have to. No accountant worth their salt would suggest tax avoidance but they can work with you to ensure that the tax you pay is fair.
At the end of the day, only you can answer these questions - What is the legacy you want to leave for your family? Have you considered if the goals that you first started out for your business in still relevant and in line with the finishing line? What would you like to achieve before you hand it over to your successors? If you haven’t had the conversation yet with someone knowledgeable on business exits, we highly recommend that you do so sooner rather than later. We at Fortuna can provide you with some ideas on how you too can “start with the end in mind” so that you can ensure that you are tracking consistently towards your goals.
More information can be found here:
https://www.myshortlister.com/insights/succession-planning-statistics
https://business.gov.au/planning/business-plans/develop-your-succession-plan