Why do I need a Succession Plan?
Succession Plans are just one of those things that many business owners never get around to. Although some 80% of business owners intend to retire in the next 10 years, three quarters of all owners do not have a succession plan. They may have a few ideas about what they intend to do, but they have not sought advice, or mapped out their plans.
It begs the question, Is planning really necessary, do you need professional advice and if you have firm ideas on what you intend to do, is that not enough? Well the answer is a common sense one. If succession is really important to you, and if you do not want to leave things to chance, then planning, independent advice and early action is critical.
A steady and progressively managed transition, when started early, will provide certainty and assurance to you and to future generations in an environment of continued growth and compounded wealth.
Benefits of succession planning
Succession is all about outcomes. It is about ensuring you achieve what you want to achieve for your business, your family, your wealth and yourself. By listing some common goals for succession you will quickly see why they should not be left to chance:
- Grow and maximise the capital value of my business
- Allow me to be actively involved in my business for as long as I want, at the level I want and as long as l can make a valuable contribution
- Build my wealth and ensure I have enough capital to do things I like and to be able to enjoy life when l begin to wind back from the business, and then finally retire
- Provide for my family and ensure my wealth is not lost by the next generation
- Receive value for my 40 years of effort
- Transfer the business over to the next generation in a manner that will provide for its continuity, growing profitability and capital value
Looking at some of the common events that regularly occur and which can disrupt these goals:
- Unexpected death, illness or injury to yourself or family members
- Rapidly changing market conditions which undermine capital value (e.g. GFC)
- Complex, or simply messy, corporate structures so assets are not where you expected them to be and are not controlled/owned by who you thought would
- Poor taxation planning leading to a loss of wealth through income tax, GST, stamp duty and other imposts
- Family disputes, porces and break-ups in de-facto relationships
You're in control
Now while you cannot overcome an unexpected event, you can have your succession plans in order so that these contingencies are considered and provided for. You most certainly can review your existing structure and match it against your proposed succession plan, and ensure a strategy is developed to minimise taxation etc, and that your goals are achieved.
A succession plan should consider the following matters:
- What are your goals and what outcomes do you hope to achieve from the succession process?
- Who are your family members and what roles would you like to see them play in the business in the future?
- Where is your wealth presently held, is this structure appropriate and safe, who do you intend to transfer it to and will it all work in a tax effective way?
- What do you intend to do with your business to ensure its value is maximised and its continuity assured?
- What will be your legacy and is it important to you?
- How do I ensure all of the above is considered in a professional and sensible manner and acted upon?
Succession Planning is important. We call it Business Evolution as we believe it is more about growth and the future, rather than retirement and the past. If you do not want to leave your wealth and family unity to chance then you must plan for it actively, and professionally, today.
FREE Business Evolution Guide
Pitcher Partners has prepared a simple guide for closely held and family businesses to assist in the development and completion of a Business Evolution Plan. For your free copy email firstname.lastname@example.org
Ground Breaking Research Partner
Pitcher Partners is committed to making a difference for Australian businesses and finding solutions that will support family businesses in particular. That’s why we have partnered with Swinburne University to undertake an Australian Research Council supported project that, for the first time in Australia, examines the dynamics, barriers and success strategies for succession in Australian businesses.