Perks Director, Business Services & Accounting, Kim Bigg has many years of experience in succession planning, predominantly in the agricultural, family and private business sectors.

He says all privately owned and family companies should understand the implications of not having a clear roadmap for transferring control of a business. Whether that is handing it on to the next generation, to a non-family member or, in time, preparing the business for sale.

“The risk of not having a clear succession plan is that you have a lack of direction and a misunderstanding among the business’s key stakeholders,” says Bigg.

“That’s not necessarily just family members; sometimes that’s senior staff or others external to the family.

“The ultimate problem is that your business growth stagnates, because it’s hampered by this concern over the succession. Then in the end, you lose value of the business over the longer term.”

With a succession plan part of the lending criteria to obtain finance from many of the banks, a lack of one can also negatively impact a business’s ability to grow.

“Banks are starting to look at these things and wanting more information around what the company’s longer term business plan is.

“At the end of the day, your lending partner is an extension of your business and will be looking for certainty in terms of your business continuing to meet lending conditions both now and in the future. And in that sense, succession planning does help.”

While Perks works with private businesses across a broad spectrum of sectors, Bigg confirms that there would not be any industry that has not needed to deal with succession in some form.

“In some cases, more complex issues arise when wealth has been built up and is interconnected with the business; it is both an asset and essential to the business’s operation. It is a similar situation for companies that own their own premises.”

Bigg explains that creating a succession plan starts with having regular discussions around how the business is being run and its decision-making processes. An additional benefit of bringing this greater governance to the business is that it can help to lessen issues more driven by emotion.

“If you don’t talk about these things, it becomes a mountain and the topic no one wants to talk about. You really need to start by having very modest and realistic goals,” he says.

“Sometimes people think, ‘Okay, we’re going to do succession planning this year’, and that’s not really how it works.

“It’s got to be an ongoing discussion on how you’re going to achieve it. Start by having a conversation about it to at least reduce the barriers and be in a position where everyone can talk openly and honestly.”

Having built up trusted relationships with his clients, Bigg finds many eventually turn to him for help with succession planning.

Usually, the first thing he does is talk to each family member separately and record their goals and objectives for themselves and for the company.

“It is not necessary that they are all identically aligned, but if you can find some common ground, you can bring everyone together and have honest conversations regarding the future direction of the company.”

While he stresses that succession planning should be an ongoing part of every business, with formal meetings held annually with minutes taken and chaired by a trusted third-party – getting to the point of having a solid plan can take anywhere up to five years. So, starting the process sooner is always better.

For family businesses looking to transfer responsibility between the generations, he says “a respectful attitude” is key to successfully starting the process.

While he says timeframes and actions are essential, they do not have to be set in stone and it is important there is some flexibility in the process.

Significantly, Bigg highlights that succession planning and estate planning should go hand-in-hand and that any intended outcomes should align. With business owners rarely ignoring estate planning, he says they should expand their focus beyond what happens if they die.

“It’s also important to know what happens if you live, and to address the  succession or transition in the here and now.

“It can become a bigger problem if the business is stagnating because there is uncertainty around leadership and control.”

Bigg notes that inadequate business planning can often put family relationships at stake.

“A breakdown in the family dynamic can be a much bigger loss than a financial one. Succession is as much about relationships, as it is about securing the financial longevity of the business.”