What is it and why your business needs it
Planning for the future of your business – or ‘succession planning’ – is not only a plan for retirement, it’s a plan for managing the unexpected.
“Succession planning is all about clarity, and articulating how your business can continue to operate in the future, with someone else at the helm,” explains Director at Seaview Consulting, David Fotheringham.
What should you consider when creating a succession plan?
To start, consider your objectives for the future. Do you aim to sell your business or pass it on to a son or daughter? During this process it will be necessary to examine your current business structure.
“Analysing your business structure and potential options is inexpensive but essential to achieving the best possible outcome from your succession plan,” says David.
From here you will be better able to determine your succession planning options. Choose the path that best suits the needs of your business, your family, clients and staff.
Ensure your plans maximise the chance of a smooth transition. This could include an agreement from a buyer to take on your staff. If you are grooming family to be part of your succession plan, are your objectives clear and agreed, are all family members on the same page, and is there genuine buy in?
The final step is to document your succession plan clearly and simply – making sure you share your plan with those most important to you. Transparency and preparation are key to ensuring a smooth transition when the time arises.
When is it a good time to start succession planning?
“We would encourage any building or construction business to build succession planning into annual strategy discussions,” says David.
What will succession planning look like in the future?
“In future it will become increasingly important to consider the true market value of your business,” says David.
“Younger generations do not have the capital to invest the large sums of money once considered reasonable when purchasing a successful business. Without an honest evaluation of your business, serious financial implications can result.”
“Consider creative solutions for ownership transfer including vendor finance or the partial sale of a business with some security still held by the previous owner.”
What should I put in my succession plan?
The Australian government small business website business.gov.au is an excellent, independent source of practical tips on how to create your own succession plan, and even includes a downloadable template. It suggest contents such as:
- Business succession details: include business name and current business structure; names of the current stakeholders covered by the succession plan; type of succession plan – complete or partial.
- Proposed organisation structure chart
- Key personnel changes table: include employee name, proposed job title, skills and training required.
- Skill retention strategies and training programs
- Business registration changes: registration transfer details, change of business structure, all other relevant transfers.
- Legal details: associated contracts, buy-sell agreements, final will or testament, all other relevant legal documentation.
- Insurance policies: current policies in the event of death, disability, injury.
- Succession timetable: include succession phase, action items, proposed start and end dates.
- Risk management plan: succession risk, likelihood of occurrence, impact and contingency.
- Financial considerations: include current business value, proposed retirement income and/or sale or buyout details, taxation tables.
For more information on how to get started or what to include in your business succession, click here.
