Cavell Leitch Law
 

Succession Planning - The Future of Your Business

To maximise the chances of your business (a) surviving you and (b) being sold for the highest price, you must plan your business succession properly. In this article we examine some of the key considerations that we consider when conducting this process with our clients.
It has become very clear to us that few business owners recognise the importance of planning for the succession or sale of their business until it is far too late.

This results in them receiving hundreds of thousands and even millions of dollars less for their business than they could have received with better planning.

Normally a business owner puts considerable energy into ensuring that ongoing business operations are efficient and profitable.

It is equally important to put considerable effort into laying the ground work for sustainability and ongoing succession so that there is something worthwhile to transfer to others when the time to step down approaches.

In a recent ANZ survey 50% of all small business owners identified succession as an issue. 50% wanted to retire by 2012 and 33% wanted to be less active in their business by 2010. 76% are still actively running their businesses and only 10% of them have an exit plan. 62% were over 50 years old and 45% aspire to retire in the next five years.

Time and time again we are meeting with our business owner clients and discovering that they have not addressed this issue at all.

If you are in this position then you must read this article carefully and then make an appointment to come and see us.

To start you thinking about the issues involved, consider the following points:

  • Your succession vision needs to include business, personal and family considerations.

  • Succession /exit planning is a complete process. Doing only a small part of it is simply not enough.

  • You need to identify successors, either in the family, withing the business or in the wider marketplace.

  • If your business is a "family business" there needs to be full family communication to discuss the wishes of the business owners and their family. it is a proven fact that often the family members do not share the aims or ambitions in relation to the business that the owners (usually the parents) subscribe to them. A facilitated meeting is often a very worthwhile investment. Discovering this too late is very common.

  • A business owner must be com mitted to handing over not only the ownership of the business but also the control.

  • The creation of a succession/exit vision must always start with identifying the end in mind. Consideration should also be given as to their personal retirement planning to ensure that their retirement needs are going to be met from the sale of the business assets or the transfer to successors.

  • The business owner should operate the business as if they were expecting a purchaser to make an offer at any time. The exist success strategy must be to present the business in a relaxed structured way to secure the greatest number of willing buyers with the maximum sale price. To attempt to sell a business without the proper accounts and up to date valuation of assets will only impede a sale and result in the business being sold at less than its proper value.

  • Many businesses spend considerable time trying to minimise the profitability shown in the business financial accounts to reduce tax payable. Of course, such behaviour makes the business look less valuable to potential buyers. Planning for a sale will help you to establish when it is time for the business to look as profitable in the accounts and how to do this.

  • The business owner should choose a professional team of a lawyer, accountant and other professionals including investment management professionals who will work together to create a succession/exit strategy that will achieve the outcome required in your succession/exit vision.

  • For a moderate investment of time, and some legal and accounting fees, you can potentially double, triple or even quadruple the sale value of your business - and importantly you will make the chances of being able to exit your business easily far more likely.

At Cavell Leitch Law we have specialists in succession planning and we are more than happy to conduct an initial interview to help get you started on your plan for succession and retirement.

We do not expect you to have anything prepared for such a meeting and we can lead you through the entire process from start to finish.

The majority of our business owner clients leave this process far too late and we are left trying to make emergency changes at the eleventh hour to try to assist them.

If you are a business owner and do not have a succession plan in place then please contact us today to discuss.


This article has been prepared by Cavell Leitch law for general information purposes only and important expectations and other relevant factors may not have been included.  If understanding the legal area covered by this article as it affects your specific circumstances is important to you then please contact us for a proper legal opinion.