The coach of a 4 x 400 relay team creates a strategy for how each leg of the race will be run and how the baton will be passed. A business succession plan is a strategy for how you will transfer ownership and control of the business (the baton) to your successors.
Many businesses have no succession plan in place or an existing plan is woefully inadequate. This may be because of an owner’s reluctance to relinquish control. Letting go of the business might seem like losing an integral of your identity or self-worth. Retirement can look like a void, without purpose or shape.
But for the well-being of the company, its people, and its clients or customers, it is essential to have a well-developed succession plan in place. It is equally important that the plan be regularly reviewed and updated.
Succession planning should begin almost the moment the company is formed. This will be the roadmap for how the business will be run, if and when, you or a partner moves on to another opportunity, retires, is incapacitated, or passes away. Without a succession plan, the continuation of business could become chaotic or impossible.
The plan should clearly identify what is to happen to the company’s assets, who will receive ownership/control, as well as all the financial, legal and operational steps related to your exit from the business.
Legal: Change of legal structure, terms of succession, change/transfer of registrations, licences and permits.
Operational: Departure date, retention of any operational role, successor’s responsibilities, mentoring of the successor, employee contracts and work agreements, condition of assets, and intellectual properties.
Financial: Will the business be gifted or sold to successor(s), current market value of the business (including your share of it), financial and tax implications of succession, the income you need in order to retire or leave the business.
Timing: Assessment of when is the right time to sell or transfer power.
A succession plan takes place over an extended period of time and the steps involved can be milestones marking the accomplishment of each phase of succession. These steps should be included:
Without a succession plan, everything about your business may be in jeopardy. Your heirs also could be adversely affected by your lack of planning.
You built a business with courage and pride. You want it to be in healthy condition as you leave it, and you want to entrust it to those who will ensure its continuing success long into the future.
It is never too early to develop a succession plan and put your business and personal affairs in order. Contact the financial and legal specialists at ProAdviser.com.au for assistance. They will be happy to help you with your plans.