Letting Go of the Reins – Succession Planning For Your Business
There are many reasons you may decide to sell or pass on your business. It might be a long-awaited retirement, health forcing you to consider your options, or you might just want to take a break. Preparation and planning are important components of exiting your business when the time is right. Succession planning is best done in advance and when are not pressured to make decisions for you and your business.
We know it can be difficult to start making plans to loosen the reins – but advance planning can help with the emotional side of leaving your business too.
What Is Succession Planning?
Succession Planning is a process by which you start considering the ownership and/or management options for your business when yourself or a critical team member is looking to step down from their position.
A succession plan is commonly done when you have a particular person in mind who will take over the business. This is often a family member, or it could be a long-term employee.
Or perhaps you would like to prepare it for sale. It takes time to prepare for such a milestone transition. A well-planned and implemented succession plan can make for a seamless process and will provide the least disruption to operations within the business.
Document Critical Systems and Processes
It’s the old adage and one we hear a lot when we speak to people about their businesses – they keep the knowledge in their heads. How things work is second nature to them and there’s never been a process and procedure manual in the business because it hasn’t been needed before.
One of the key aspects of succession planning is making sure the business remains profitable and operational without you there. So, it means this information needs to be shared and documented in such a way that it can be used by anyone to recreate the way you do business.
Start by identifying specific tasks as you complete them and record the steps taken from the start and right through to fruition. Identify the task accurately and simplify the instructions so it’s easily understood by someone who has no prior knowledge. This is also a helpful first step for organisations experiencing growth and needing to maintain quality control of their processes.
Documenting these processes needs to be considered well in advance, so they are accurate and comprehensive. It will also help to strengthen your business while you’re still there.
Sorting Out the Finances
Finances when exiting from a business can be a tricky hurdle depending on the business structure and how finances have been managed in recent years. There may be a need to extract business finances from personal and consider whether any financial benefit will remain for the person passing on the business.
There will also be a need to determine a sale price if the business is going to be purchased by the successor, and a review of any other financial implications that may arise from selling or passing on the business.
Plan It – Get It On Paper
There are many questions that go beyond the systems and the finances and by thinking about them in advance, you’ll be better prepared when the time comes to walk out the door and hand your business over.
- Will you still maintain a role in the business?
- What is the time frame for the succession plan?
- Does your successor need any training or certification?
- The paper trail – domain names, company names, licences, permits.
- Consider contingencies and risk management.
- Will you be receiving payments from the business?
- Are there any taxes payable?
Review your plan regularly once it’s in place. This will ensure that if it ever needs to be implemented at short notice or earlier than expected, the information contained will be current and relevant making a smooth transition possible.
For a whole range of business advice, including succession planning, business valuations and so much more, contact us on 1300 888 803 or book online for an appointment with our business advisory team.
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