Succession Planning is an important process to undertake to prepare for the transition of one business to new owners. In a perfect world, the reins will be taken over smoothly, and the new business owners will continue to prosper. If you're very lucky, you'll be around to see another generation of your family confidently carry on business.
- Australian family owned business owners will transfer more than $1.6 trillion in assets over the next 10 years.
- South Australia & Victoria have 120,000 family businesses and employs more than 55% of the private sector workforce.
- Combination of older SME owners (baby boomers) and market convergence whereby a potential crisis looms because children of baby boomers do not want to take over the reins.
What does this mean?
Consider the following range of issues:
- Increasing number of businesses for sale
- A shift in SME owner thinking from 'how much does my business produce' (income) to 'how much is my business worth' (asset value)
- Some owners will stay in their business longer
- Need to allow more time to prepare business for sale
- Higher level business, management and advisor skills required
Why is Succession Planning important?
- Provides the existing and future owners with greater certainty
- Enables the business to continue providing staff with opportunities
- Allows for the grooming of likely successors and senior management
- Minimises tax on the transfer of ownership
- Determines a timeframe to facilitate a smooth handover, and
- May reveal weaknesses in the business which can be rectified to ensure the business can grow and prosper.
Don't delay - it's time to get started
In our experience, the 4 Cs prevent owners from tackling succession issues. They are:
Control: the fear of losing it
Conformity: customers love me and there is no better way to do it than my way
Complacency: tomorrow is a long way away
Complexity: Planning and implementing an orderly succession plan is hard work.
Often means tackling the 'soft' issues such as promises to staff and other owners etc.
Our experience suggests that ultimately what most owners want is certainty.
- Certainty of business value
- Certainty of the process for the business to change hands
- Certainty that the process will extract the most value for all parties
- Certainty that when you have left the business will continue to grow and service customers to the highest possible standard
- Certainty that your next stage in life is mapped out
Advantage One has developed an 8 Point Succession Planning process. It canvasses many issues, such as personal objectives, how to determine a fair value of the business, likely successors, source of funds, enforced succession caused by death or illness, buy-sell agreements, wills and taxation issues.
Advantage One is a leader in succession planning with unique experience as a buyer, seller and facilitator.
Whether you are thinking about retirement, change of career or simply looking to release some equity in business to pay off debt or buy out an existing shareholder, then contact Advantage One.
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