Succession plan vital for continuity of an enterprise
Research by Melbourne's Cameron Research Group in 2010 found that, of those who intended to sell their businesses within the next five years, 32 per cent had given no thought to a succession plan and just 12 per cent had a documented succession plan in place.
"Succession planning diffuses the time bomb ticking in your business," the founder of succession company Time Advice, Andy Gowers, said. "Everyone exits at some point; it is just a matter of why."
The succession-planning process should involve dedicated, experienced advisers. He recommended a core team consisting of a project manager, a financial planner, a legal eagle and your accountant. The process usually cost about $5000, Mr Gowers said.
"A succession plan is a will for your business and it will be needed at some point in the future," he said.
Leigh Riley has written Your Business Succession, a collection of case studies on succession planning. She said too many business owners mistakenly believed they could hang out the "For Sale" shingle and the right buyer would 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."
A succession plan put Albert Bensimon's mind at ease. As the managing director of national and online jewellery chain, Shiels Jewellers, he implemented a succession plan a decade ago after deciding he wanted his son, Toby, to take over the business.
He consulted a number of professional bodies and other business owners to ensure he was able to train his son to take over the business he had built from the single jewellery store he 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 said.
The federal government provides a succession plan template and guide at www.business.gov.au
Frequently Asked Questions about this Article…
A succession plan is essentially a "will for your business" that sets out how the business will continue if current management can no longer run it. Succession planning reduces disruption, protects value and gives owners peace of mind that the business will survive transitions.
Research by Melbourne's Cameron Research Group in 2010 found that among owners who intended to sell within five years, 32% had given no thought to succession and only 12% had a documented succession plan in place — showing many owners leave planning too late.
Succession planning should involve a dedicated team of experienced advisers. Andy Gowers of Time Advice recommends a core team made up of a project manager, a financial planner, a legal adviser and your accountant to cover the key business, financial and legal issues.
According to the article, the succession-planning process usually costs about $5,000 when you use a dedicated advisory team to prepare a practical, documented plan.
Leigh Riley warns that simply hanging a "For Sale" sign and hoping the right buyer appears is often the least successful approach. Banks are lending more conservatively, so buyers may struggle to get finance and owners can be forced to compromise on price.
The article cites Shiels Jewellers' managing director Albert Bensimon, who put a succession plan in place so his son Toby could take over. He consulted professional bodies and other owners and had his son learn the business from the bottom up to ensure a smooth family transition.
The federal government provides a succession plan template and guide on its business website: www.business.gov.au, which is a good starting point for everyday investors and small business owners.
The article stresses that everyone exits a business at some point, so you should start succession planning well before you intend to sell or step away — ideally years in advance — to avoid rushed decisions and protect the business's value.
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