Nov 22, 2018  | Tags: business succession

Our insights

Business owners often feel like their business is an extension of themselves. After many years or decades it can feel like the business forms part of the identity of the business owner, and vice versa.

That’s why what happens to a business after retirement is so important to owners, but still many owners fail to put a clear succession plan in place to make that transition simpler and more successful from the perspective of the parties involved.

Start planning as early as possible

The best time to start planning for your exit is when you start your business. Barring that, succession planning should be done as early as possible to avoid conflict among successors and so a blueprint exists in the event of sickness or death. Succession plans are not prescriptive, however they often include details on whether the business leader plans to fully retire or remain involved in the business, whether the intended successor is a family member or business partner, what the timeframe is, risk management and communications strategies, agreements on how the owner will be bought out of the business and plans for retaining and up-skilling staff.

Will you keep the business in the family?

It’s natural to want a son or daughter to take over the family business, but these successions are sometimes more complicated what you might think. Leaving a business to one child could create jealousy and conflict among siblings. Some children also have other career goals that have nothing to do with the family business, but sometimes fail to articulate that for fear of causing offence. Once again, the best approach is to start planning early and have open and honest discussions with those involved so there are no surprises when the time comes.

Implement a shareholders agreement or buy-sell agreement

One of the best ways to create clarity around how you plan to exit a business is to have a strong shareholders or buy-sell agreement between business partners. These are legally binding agreements that set out when a share of the business can be sold, and who it can be sold to, as well as how the shares will be valued. An experienced accountant can advise on which type of agreement will best suit your business.

Develop your staff early

When a business leader exits an organisation, it can leave a skills void, but the business can also lose some of its brand credibility. That’s because the founder or long-time business leader is often the public face of the business and the person that has developed relationships with customers over many years. To give your business the best chance of success after retirement, start involving your successors in significant business decisions early, and take them along to high level meetings with clients and get them to represent the business at public events. If your customers trust your successors and have an existing relationship with them they will be more likely to stick with your business even after you’ve retired.

A great way to assist in this transition is to step into a board member, chairperson or advisory role, giving a sense of continuity while only having to work perhaps a few hours a week.

Continually review your plan

Your succession plan should be considered an evolving document, and it should be reviewed whenever circumstances change. Changes impacting your succession plan could include family members expressing interest in doing other things, new partners coming on board or altered timeframes in terms of your retirement.

Get advice

It is time to get started on your business succesion plan. As your trusted wealth advisers, Calder Wealth Management are with you every step of the way. Call us on (08) 8373 3333 to schedule your free initial appointment. 

Written by Ben Calder, Private Client Adviser at Calder Wealth Management.