What is Business Succession Planning?

Business Succession Planning is the development of strategies by business owners and managers, (assisted by your Financial Adviser), which determine how the key associates can exit the business whilst ensuring business continuity.

Why Have a Succession Plan?

Business Succession Planning is beneficial when either an owner or leader in a business wishes to retire, sell the business or wants to retain key staff.  The plan provides a clear understanding of how equity, existing loans, debts and revenues will be split amongst key associates. Replacement strategies allow the reassuming of capable leadership and other business affairs.

It is also a valuable tool in horrific times such as if a key associate unexpectedly died or was involved in an accident leaving them incapable of returning to business. In a time of shock or mourning, a succession plan can relieve the burden by directing the other key associates in transferring necessary estates or beneficiaries. The plan is also beneficial in bankruptcy situations.

Without succession planning the business may fail and expose you and the other associates to unnecessary financial risk.

Managing Your Succession Plan

There are several key topics which need to be considered when developing your succession plan.  Although every business plan is unique to specific needs, these key topics should be included.

1. Evaluate your current position. This includes the business goals and objectives, current and future financial positions, and where the key associates are personally.
2. Identify your goals. This should include all personal, financial and business goal setting.
3. Plan your succession strategies. Issues covered should involve changing leadership or exiting from ownership as an exit strategy. Management involvement and capabilities should be defined as well as financial considerations, stakeholder responses and timeframes.
4. Leadership change strategies. If a key associate wants to exit as a leader in the business however remain an owner, strategies must be planned to protect their investment and guarantee continuity.
5. Ownership change strategies. Strategies must be developed to ensure the owner gets the best possible financial outcome upon succession.
6. Superannuation and Retirement funding. This section should cover benefit withdrawals, fund considerations, contribution considerations and tax considerations.
7. Managing your plan. The plan must be continually updated to ensure it is always effective. Three key management considerations are risk, project and stakeholder management.
8. Implementation.  The plan can now be implemented and put into practice.

Don't be a statistic!**

• Only 25% of people in small business could keep their business going or maintain their lifestyle for more than six months if they suffered serious illness or disablement*
• 47% of people in small business are not aware that income protection is tax deductable*
• 31% of small business owners are aged over 50, which makes succession planning essential^
• 69% of people in small business have no income protection*

* IFSA, Small business; Missing out on valuable tax breaks, 2006
^Australian Bureau of Statistics, Characteristics of Small Business Cat No. 8127.0,2004

If something happened to you, ask yourself the following:

• Would you be confident that you and/or your family would receive adequate payment for the transfer of interest between you and your business associates?
• Would the business have sufficient funds to repay any loans owed to you and release any assets held as security?
• Could your business associates continue to run the business in your absence?

What if something happened to one of your business associates?

• Would the business struggle with the loss of key skills and costs to replace those skills?
• Would you lose a key revenue generator?
• Would you have enough cash flow to meet your business commitments?
• Would you want to be in partnership with their spouse or family?

These are all scenarios that can be easily avoided by having a business succession plan put in place by a qualified Wealthfarm Financial Planner.  Call now for a chat about how we can help you on 1800 WORK IT (9675 48) or email us your query through this form.

This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial planning advice before acting on this information.  You should seek advice from a risk specialist financial adviser before taking out insurance for business purposes, or altering an existing policy. A risk specialist financial adviser can help with convenient ways to package and pay premiums, and review any of your existing insurance. Your risk specialist financial adviser may also be able to liaise with your legal representative to ensure your insurances are adequately reflected in your legal documentation

**MLC Risk Specialist Network. Building and Protecting Your Business brochure.

Financial Services Information

Nicholas Sinclair, Stephen Pollard,
Michael Smyth and Javier Fonseca

Wealthfarm Financial Planners
ABN 77 159 754 322

Authorised Representatives

GWM Adviser Services Limited

Australian Financial Services Licensee
Registered Office at: 105-153 Miller Street
North Sydney NSW 2060

Disclaimer

Wealthfarm Pty Ltd, ACN 119 411 175, t/a Wealthfarm Financial Planners, is an Authorised Representatives of GWM Adviser Services Limited, AFSL 230692, an Australian Financial Services Licensee with its registered office are 105-153 Miller Street North Sydney NSW 2060.