Good Succession Planning Starts Now!
The importance of a good succession plan can be seen almost daily in the news or the law courts, so it is surprising just how many business owners leave succession of their business to chance by not having a good plan.
What is succession? Succession is the transfer of both management and control within a business. It does not necessarily mean a complete exit from ownership – but it does mean an exit from management.
Generally there are three areas of succession that needs to be planned, preferably well before you need it, they include:
- Ownership – who will own the business
- Management – who will run the business
- Internal – the nurturing, development and retention of key people
Succession is an area where you can never be too well prepared, failure to do so can lead to disaster, financial disappointment and possibly relationship breakdowns between interested parties. Dividing a business, especially where family is involved, can be a very delicate matter so specialist advice is almost mandatory. But here are a few tips to getting you thinking about what is involved in creating a good succession plan.
- Do not wait until the eve of a sale or retirement, start your planning sooner rather than later
- The future of the business depends on its strong leadership so identify early those people within the organisation that possess the attributes required to take over the reigns
- Ensure you know the key profit drivers in your business
- Your succession plan needs to be constantly reviewed for relevance and accuracy.
- Ensure that your business systems and procedures are documented and kept current so the business can continue in your absence
- Consider involving all your business advisors in creating the plan (accountant, business broker, solicitor, banker, financial planner, insurance agent and real estate agent if property is involved)
- Talk with your accountant and solicitor to ensure that your current business structure will allow an easy and tax effective succession transfer or sale.
- Know how involved you want to be in the transition phase
- Once a succession plan is in place, it is important to communicate that plan to key management people and or family. Your successor needs a clear understanding of the path to the future, as well as the role they play in that path
Letting go is undeniably tough so start talking openly to the interested parties and your various business advisors to get a documented succession plan in place. And remember, just as you need to regularly check that your Will is still relevant you should do the same with your succession plan!
Richard Kemp – Watts Price Accountants
The advice provided on this Article is general advice only. It has been prepared without taking into account your objectives, financial situation or needs.