Succession Planning for your Business By Mark Calvetti on 13/05/19 - Mins to read: 2 minutes At some point in the lifecycle of every business (e.g. the retirement of the owner/ founder, personal issues, market circumstances, etc.), you must consider your business’ succession. Deciding the best options for the future is both an important and sensitive issue. Often, the owner or founder has a strong emotional connection to the business after countless hours of hard work and dedication. Yet, in spite of this, a discussion on exit strategy and succession planning is frequently views as one-dimensional by a business owner – ‘Do I want to sell my business?’ – rather than taking a much wider view of where the business is positioned in its lifecycle, as well as the financial and personal needs of the owners. The better question to be discussed is “how can I prepare the business for an orderly succession at some point in time?” Decisions on whether to pass the business onto the next generation of family, going public or possibly selling all or part of the business requires a well-considered plan. In order to achieve the right outcome for all of the key stakeholders involved, some important questions need to be considered: Do you wish to continue owning the business? Are you ready to retire? Is the business dependent on one key person (‘key man risk’) and how can this be managed? Is there sufficiently capable management to continue growing the business? Is the business your main income-producing asset and how can this be unlocked? What are the estate planning issues that need to be considered? When it comes to preparing succession plans, many owners consider this process only when they are ready to exit their business. However, leaving succession planning to the last minute can heavily impact both financial and personal outcomes later down the track. That’s why we encourage business owners to consider their exit strategy well before the times comes. Exiting a business is a two-step process, as shown in the following diagram. The first step involves determining your objectives and understanding the options available. Issues to bear in mind: When would you like to exit? Do you understand the current value of the business and how it’s derived? What do you hope the business will look like in the future? How are you going to get there? What are your expectations on sale? Are there any impediments to achieving these expectations? An advisor can work through these questions with you and develop a plan to align your personal and business objectives, thereby improving the value of the business. The second stage involves the practical steps involved in selling your business or handing it down to the next generation. Achieving a successful outcome in stage two often depends on the comprehensiveness of planning in stage one. William Buck’s Corporate Advisory Team specialises in strategic business and exit planning. To find out more, contact your local advisor.