Succession Planning

There are many elements to an effective Estate Plan or Business Continuity Plan. In order to achieve success with your Estate Planning and Business Continuity Planning there are a few key areas to understand.

* Estate Planning
* Crisis Succession
* Business Continuity Planning

Crisis Succession

Could your business survive a heart attack?

Have you given serious consideration to the consequences of the loss, either temporary or permanent, of your partners in business? Or of the effect on the business of the absence of somebody who plays a major part in its continued success?

Possibly not. Surveys show that less than 30% of business owners have any sort of succession plan for that business.

We are serious about the future continuity of your business and recognize that it is the people in business that make the difference. Without proper planning unexpected disasters can have major financial and emotional impact upon people’s lives, not just the life of the business.

A Business Succession Plan is a financial and tax plan that will :

♦ Realise your assets in the business at a time when you or your beneficiaries need them,

♦ Give your business every chance of survival when you, or your partners, are gone or suffer long term  illness,

♦ Ensure that families related to the business receive adequate compensation for the true value of their interest in the business,

♦ Fund the transfer of business interests to ongoing partners,

♦ Avoid you having to run the business with someone not of your choice,

♦ Provide a ready market for your business interests,

♦ Structure your affairs to reduce unnecessary capital gains tax and income tax being paid by your beneficiaries

We want to help you to secure the future success and continuity of your hard-earned asset – your business.

With this purpose in mind, we have developed a specific service model to advise on, and implement, succession planning strategies.

Don’t be a victim of business euthanasia, follow a template for the continuity of your business!

What If You Don’t Have a Crisis Succession Plan?

  1. The new shareholders may insist on being involved in the business, but may be inexperienced or ineffective.
  2. The new shareholders may want the remaining shareholders to buy out their shares.
  3. A price may need to be put on those shares at a time of upheaval.
  4. The remaining shareholders may end up doing 100% of the work, but keeping a lesser percentage of the profits.
  5. The business may need to hire a replacement while part of the profits are distributed to a non-involved party.
  6. The family of the deceased shareholder may end up dependent on the future dividends declared by the business.
  7. Creditors may call in their loans.
  8. The customers and employees may change their view regarding the continuing value of the business.

How a Funded Crisis Succession Plan Works (the process)

Succession Plan flow chart

Business Continuity Planning

Business Continuity Checklist

Business Succession Statistics

About 83% of all business in Australia are family business, of which 80% are private companies.
The estimated wealth of these business is $1.2 trillion – more than double the value of all the ASX listed companies.
Survival rates for AFB from the 1st to 2nd generation are 30%, while survival rates for the 2nd to the 3rd generations are 15%.
Founder average age 56 – 52 in 1997 survey.
1 in 5 proprietors are more than 65 years of age.
82% of business owners see succession and retirement as important.
Only 23% have documented succession plans.
45% say retirement is dependent upon realisation of business assets.
18% say retirement is contingent on the sale of the business.
44% believe superannuation is inadequate.
100% of you will exit the business.
100% of you will exit the business.
The Question Is How?
Have you sought external advice in developing a succession plan?

Leadership Continuity

Consider the two dimensions of business ownership :

1. Assets : the bricks, mortar, real estate, inventory, etc
2. Power : ability to hire and fire, make decisions, sign the checks, etc

Now think of a Business Succession Plan as the third leg of the stool that keeps the other two legs standing.

How do we pass on your assets and your power to the next generation in a way that serves you in your retirement and also enables the business to thrive?

Ownership (Planned) Succession Myths

“10 Misconceptions & Realities about Succession Planning”

Misconception # 1
Business Succession Planning is a “Code Word” for “Putting Dad (or Mum) out to pasture”.

Transferring ownership doesn’t mean retirement.

Misconception # 2
Business Succession Planning creates more problems than it solves.

Business Succession Planning solves problems in advance.

Misconception # 3
Business Succession Planning is a one-way street.

One person’s “Exit Strategy” must be the next person’s “Entrance Strategy”.

Misconception # 4
My business isn’t worth enough to worry about.

Valuation is the key to the future.

Misconception # 5
I will be forced to treat one or some of my children unfairly.

Fair does not always mean equal.

Misconception # 6
It’s too early for succession planning.

The future has a way of arriving unannounced.

Misconception # 7
Any Buy / Sell Agreement will do.

You need a Buy / Sell Agreement that works.

Misconception # 8
My children will work it out – they know what my wishes are.

“The only way to really get to know someone is to share an inheritance with them.” (Mark Twain)

Misconception # 9
None of my children are in the business – I have no succession alternatives.

There are alternatives.

Misconception # 10
It’s nobody’s business but ours.

All businesses have default Succession Plans.

The Corporate Will Succession Pyramid

                                                        Click Image to Enlarge


One way or another, your business will have a succession plan.

Your succession plan is far too important to leave in the hands of others who will invariably act in their own best interests.

It is up to you to have a succession plan that overrides the “default” succession plan that others would impose upon you.