Business Succession Planning can be a difficult and long process, however the rewards of a properly documented Business Succession Plan far outweigh the time and effort spent in preparing the plan. Too often have I seen clients attend my office after an event such as death or retirement where a business is suffering. Often problems could have been avoided with a properly documented Business Succession Plan.
What is Business Succession Planning?
In simple terms, Business Succession Planning is developing a strategy to transfer the ownership, management and financial responsibility of a business.
Who should be involved in the Business Succession Planning?
There are a number disciplines and professionals that should be engaged to ensure that the Business Succession Plan achieves all of your objectives. Often I will meet with Accountants, insurance brokers, financiers and sometimes management consultants to ensure that all areas of expertise are involved.
What matters should be addressed in Business Succession Planning?
It is difficult to outline all matters that should be outlined because each business is different. Depending on the business the following matters should be factored into the Business Succession Plan:
- Retirement plan for key stakeholders in the business;
- Management succession plan which deals with the timing of the handover of the management of the business;
- Equity succession which deals with the actual transfer of ownership, and payment for this.
- Once the succession plan has been finalised it will need to be incorporated into the estate plans of the current owners.
Process for Planning
It is very important a structured process to approach the Business Succession Plan. The process will involve consultation with appropriate professionals and deal with all of the elements that need to be considered. Part of the process also involves conducting a review and due diligence of the business.
This approach will include considering the following questions:
- Who could and would run the business for you if something was to happen;
- How do you propose to continue your income after your exit from the business;
- How did the other important stakeholders in the business view this;
- What is the business worth;
- What insurances do you have in place, both for the business and personally;
- Do you have legal documents such as Shareholder Agreements, Will, Power of Attorney, Buyer Solicitor, Business Will;
- Do you have a strategic plan for your business;
- Who are the key stakeholders in your business that will continue to be involved in the business after you exit;
- When would you like to exit the business.
It is very important that details consideration is given to any business succession plan, and professional advice sought from a number of disciplines. Please do not hesitate to contact me if you would like to discuss this very important strategy for your business.