It’s said that the ideal time to plan to move out of your business is when you start it, but […]
It’s said that the ideal time to plan to move out of your business is when you start it, but – in reality – most business owners’ eyes are not on the exit from day one.
Deloitte partner Craig Holland, author of The Art of Business Succession, reports that fewer than 30 per cent of family businesses have an achievable succession plan. And that’s despite the emphasis the ageing population has put on succession issues recently, as the Baby Boomers look to retire.
Business succession is not just a matter for over-55s, it’s about being entrepreneurial and identifying the goals you have for yourself and your business. Succession plans can work hand-in-hand with business plans and offer a competitive advantage.
Regardless of whether you want to sell your business or transition it to the next generation of managers (who may or may not be family members), one thing is certain – planning takes time.
As a standard, experts suggest an optimal three to five years is needed to benchmark a business’ performance against rivals and to show profits are sustainable.
As a business owner, you need to consider when to opt out, how much capital you require and a realistic projected business valuation. There’s the careful and often sensitive matter of identifying who can take over and managing others’ expectations and aspirations. Third-party facilitators may smooth the way.
Time is also required to announce the exit of trusted leaders well in advance to ensure management, staff, systems, technology and legal issues are in order. Customers and suppliers need to know how the business will look under a new boss.
Iain Rogers, Head of NAB Financial Planning agrees, but also points out that business owners should also ensure that they have the right business protection plan in place from day one. In the event of a forced retirement due to injury, illness or death, not just of themselves but also of key staff within their organisation, this can assist to maintain the value of the business.
“I don’t like being alarmist, but using real case studies is the best way to highlight the issues you should be considering. We’ve seen many cases when people have been injured and can’t work. Cash flow and the business suffers, and both custom and business valuations can drop quickly. This can rapidly lead to family hardship where they’ve been relying on a previously sound business.”
NAB have a wealth of experts that your banker can put you in touch with including NAB Financial Planners and Business Protection Specialists, as well as our National Trustees who can assist you with Wills and Estate Planning. NAB can also introduce you to leading professionals from its trusted panel of succession planning firms, and then work with you and your existing advisers to develop a succession plan in which you can have confidence.
NAB Financial Planners are representatives of National Australia Bank Limited ABN 12 004 044 937 (AFSL Number 230686).