Do you have a succession plan in place?
In all successful businesses the issue of succession from the current owner to the next generation inevitably comes up, but all too often business owners wait until the last minute to form a proper succession plan - by which time many options are already closed.
Once the business has survived the start-up stage, the founder should begin giving consideration to succession, regardless of his or her age.
Elements of a successful succession plan
A good business succession plan should mean that you can:
- ensure that control of the business is transferred to the appropriate people according to your wishes
- ensure that your chosen successors take over the business in a smooth and orderly manner
- avoid or reduce any tax on the change of ownership
- continue to provide ongoing and sufficient financial security for you and your family
Elements of a successful transition
There are some essential elements to ensuring a smooth business transition:
- Commitment - The founder must acknowledge that the business has to continue in order to create opportunity for those to come. Once he or she has committed to this fact, this commitment must be communicated throughout the business.
- Investing in the right people - Recruiting and keeping good people will always pay dividends and is a key item in succession planning, because when you have the right people, selecting a successor or successors becomes easier. Investing time in developing your family members or other management team members and allowing them to exercise authority and control is key to a smooth transition. By empowering a broad range of key people, the selection process is simplified and options are enhanced.
- Implementation - Having come this far, the founder should announce his or her future plans. This gives key management people and family successors a clear path to the future and a definite goal. In implementing the succession plan, the founder must be ready to step aside and allow his or her successors to take over. The founder needs to be prepared to let go of the reigns and to take on new challenges in retirement, knowing that his or her personal financial future is secure.
A succession plan, or any form of exit strategy will require careful planning. Besides the legal complexities, steps must be taken to ensure that you minimise the tax liabilities and maximise your financial gains. These are areas in which we have experience and expertise. Call us if you would like further guidance.