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Succession Planning

by Acceptance Finance

(Archived)
Tuesday, May 11th 2010, 12:17 GMT+10:00
Australia

PASSING THE BATON

Now is the time to focus on succession planning
Succession planning continues to be a topical subject and for good reason. 

The bubble of the baby boomer generation pushing towards retirement and exit will only continue. What is unclear is when the bottleneck will tighten to the extent that exit becomes problematic and business values decline.

The succession problems encountered by business in general are accentuated in smaller businesses, particularly those businesses that have been built around a single person or family.  Effective succession planning can require three or more years to ready a business for transfer and in reality succession planning should commence the day the business is opened.

What is Succession
Succession is a very deceptive term and can have many different meanings, often turning upon the circumstances in which an individual finds themselves.

Having a clear definition of what succession means in your individual circumstances is just so important in achieving a successful outcome.  If you don’t know where you intend to go, then how do you expect to get there?

We find that when you dig behind the driving motives for succession and identify the final goals being sought, the following commonly arise with varying levels of importance:

• Maximise the capital value of the business and the sum that is withdrawn on retirement
• Provide for the continuity of the business to ensure ongoing employment of staff and servicing of clients
• Provide sufficient income to fund retirement
• Enable a continuing involvement in the business post-retirement at a reduced level (many business owners find it extremely difficult to go “cold turkey” )
• Crystalise individual wealth built over a lifetime of work and provide for its transfer and continuing growth to future generations
• Formulate a plan to ensure an equitable distribution of wealth within a family to ensure family unity
• Bring to life long-term dreams of retirement, travel and self-development 
• Initiate a lasting legacy through contribution to society, often in such a way that it is not publicly recognized
• Cap off a successful career and lifetime contribution to the industry

Building Value
A core focus of the succession process is building capital value in your business.  Don’t just assume your business is worth a particular amount and that someone will be willing to pay it.  Capital value must be earned and will be assessed against market returns from alternate businesses and opportunities. 

Taking Action
Business succession should be a part of your long term business management. A plan should be developed as a matter of priority and form part of your ongoing competitive strategy.

Value is not built overnight, and will only grow as with anything enduring and worthwhile through the compounding benefit of continuous focused effort.

Start today, benefit tomorrow.

Dr Richard Shrapnel, Director Strategy & Organisation
Pitcher Partners Richard.shrapnel@pitcher.com.au

Pitcher Partners have produced a booklet – Business Evolution, A Simple guide for Closely held and Family Businesses. For your free copy, and to find out information about free seminars on this topic, please email: business.evolution@pitcher.com.au

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