When is the right time to start business succession planning?
24 Apr 2018
- Business Succession
Many business owners don’t think about business succession planning until their retirement is upon them. In some circumstances, unfortunate medical or financial issues arise and owners are often forced to sell their business as soon as possible. If you have not considered the strengths and weaknesses of your business, you will not be in the best possible position to consider succession planning for your business. Emily Shoemark and Caitlin Meers of Snedden Hall & Gallop Lawyers are accredited Succession Plus advisers guiding Canberra business owners. Find out why they advise that the best time to think about succession planning is as soon as possible.
Strategic business succession planning can use a simple business truth which Stephen Covey* included as one of his 7 habits over 30 years ago. He described succession planning as a significant aspect of the success of a business. Covey’s habit number 2 is ‘Begin with the End in Mind’, saying ‘‘if you want to have a successful enterprise, you clearly define what you’re trying to accomplish…. the extent to which you begin with the end in mind often determines whether or not you are able to create a successful enterprise.”
So if you are just starting out in business, you should ask yourself “What do I expect from my business? When do I want to exit the business?” “What is my expectation of what I want to get from exiting my business?” ”Do I want to keep this business in the family?” or “Do I want to hire employees who will take over the business? “How do I feel about selling to a competitor?” All these questions will guide you in defining and then meeting your targets.
You might, however, be within 5 years of retirement and thinking about how you can best organise and implement succession planning in your business. If so, this is the right time for you to think strategically.
Strategic planning is all about time – the simplest analogy is to ask whether you would consider approaching a real estate agent today with a view to selling your property this Saturday. Some real estate agents may be able to achieve that, but without any time to market/advertise, prepare the property and review their buyers database the price they achieve will not be the real value of the property.
Most businesses require three to five years to maximise the value and prepare themselves to extract the full value successfully. We often see stories in business media of well-known wealthy entrepreneurs making substantial money ‘trading’ businesses. They invest, they build the business, reduce the risk, and then exit profitably, making substantial gains on the investment over a few years. This is the best illustration of getting the exit strategy right: It is the ultimate test of success for these investors. If they don’t exit correctly they make no money!
How can Snedden Hall & Gallop Lawyers help you?
Snedden Hall & Gallop Lawyers is an accredited Succession Plus adviser and the local partner in Canberra. We will assist you with proven and multi-award winning** Succession Plus planning strategies to make the most of your business.
* Stephen Covey authored “The 7 habits of highly effective people” in 1989
** The Succession Plus Employee Share Ownership Plan has won the Australia-wide award for the Employee Share Ownership Plan of the Year twice in four years.