Plan for succession for success when you're gone
PLANNING is crucial for anyone in business.
Research undertaken by Melbourne's Cameron Research Group in 2010 found that of those who intended to sell their business in the following five years 32 per cent had given no thought to a succession plan and just 12 per cent have a documented succession plan in place.
The founder of Melbourne succession firm Time Advice, Andy Gowers, reminds us that people leave a business either voluntarily (due to retirement, a dispute etc) or involuntarily (due to death, illness or trauma). Business owners need to consider how their business will carry on when a partner leaves the business, he says.
"Succession planning defuses the time bomb ticking in your business. Everyone exits at some point; it is just a matter of why," Mr Gowers says.
The succession planning process should involve dedicated, experienced advisers. He recommends a core team consisting of a project manager, financial planner, legal eagle, and your accountant. The process usually costs about $5000.
Once you have your succession plan in place, it needs to be a fluid document. "Like a business plan, things will change and you need to keep things up to date to reflect any changes to your business," he says.
Too many business operators bury their head in the sand on this issue. "Don't pretend you don't have time to resolve this critical area of your business. And don't 'almost' finish your succession plan. An unsigned agreement is as useless as no agreement. A succession plan is a will for your business and it will be needed at some point in the future."
Melbourne's Leigh Riley is the author of a collection of case studies on succession planning, Your Business Succession. She says that too many business owners mistakenly believe they will hang out the "For Sale" shingle and miraculously the right buyer will come along with the right amount of money to buy their business.
"Unfortunately this method is the least successful way to yield the best outcome for the owner. This is because financial institutions aren't lending the way they used to for business acquisition, so willing buyers can't find the funding, which forces business owners to compromise on price.
"Planning for succession provides the best opportunity for financial success and business continuity for existing owners and the next generation," Ms Riley says.
A succession plan puts Albert Bensimon's mind at ease. The managing director of national and online jewellery chain Shiels Jewellers implemented a succession plan a decade ago after deciding he wanted his son, Toby, to take over the business. He consulted several professional bodies and other business owners to ensure he was able to up-skill his son to one day take over the business he built from a single jewellery store first opened in 1948.
"In our case the business has grown from a single store to a national company, so Toby had to start at the bottom to learn what was involved before the business grew," Mr Bensimon says.
"We had Toby serving, then working as a manager, before moving him into the office to work as a buyer. He had to earn his stripes because we wanted to make sure he was qualified to take over rather than him simply being viewed as the boss's son. He already makes most of the major decisions, so the transition, when it happens, won't be too drastic."
■ Federal government website business.gov.au says a carefully planned exit from a business can lessen disruptions and maximise the value of a business. The site offers businesses a free succession plan at business.gov.au/plans