Succession Planning should be a matter of priority for business owners, as a crucial part of ensuring long term business success.
For business owners who have put their heart, soul and countless hours into growing their business, putting together a succession plan can be a daunting task to face and one which is overlooked by many.
“A good succession plan is a road map through the transition of ownership or control of a business from one group to another’’ says Fiona Hele, Director of Business Advisory at Perks Integrated Business Services.
“A good succession plan will involve a review of business strategy to identify areas of growth and opportunity, an action plan to clean up existing or looming weaknesses, and a grooming of business leaders coming through.”
Poor planning for business succession can lead to sudden drops in productivity and profit margins – a consequence that can be devastating, particularly for smaller businesses. Consideration of people and culture of an organisation is critical when planning for a change. There are so many trigger events that may affect a change in ownership beyond your control, so planning for these events is crucial to long term viability of any business.
“It’s concerning that business owners are not actively planning for succession. They need to treat it with a matter of urgency given the high proportion of Baby Boomers expected to retire in the next five to ten years; and the fact that small business employs around 60 percent of Australia’s total work force” said Fiona.
The good news is that succession planning doesn’t need to be an exhaustive, labour intensive exercise. All strategies should include relatively basic business information – current valuation, tax structuring and compliance issues – with any additional content dependent on the size and nature of the individual business.
“Businesses need to remember that succession planning requires an individualised, tailored approach, rather than a generic one size fits all strategy. It truly comes down to the individual business” says Fiona Hele.
So when should you start? One of the first things to consider is that it is never too early for a business to start working on its succession. Even new businesses need to strategically map out where it expects to be at each phase of its lifecycle, including the final stage of exiting the business.
Once you’ve begun the process, the key is to then review and revise it regularly. Over time things change and the strategy behind your plan must remain current and relevant.
While succession planning might seem like a difficult and arduous process at times, it is important to ensure that this step is done right. That way, a changeover of leadership or ownership can be seen as a new beginning rather than the end of an era, and the business can continue to move forward with momentum and direction.
For more information on succession planning please contact Perks on (08) 8273 9300.
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