Nobody likes to think about it, but it’s inevitable - one day you will leave your business. You may decide to sell up, retire or may have to leave due to health reasons. That day needs to be planned for. A succession, or exit plan outlines who will take over your business when you leave.
A succession plan is a strategy which determines the best way for you to exit your business while ensuring it continues. The plan determines who will take leadership and/or ownership of the business when you leave.
Many owners choose to keep the business in the family when they leave. If you plan to transfer your business to a family member you need to consider the legal obligations as well as the impact on family relationships.
Other owners may choose to sell their business. The issue with this will be the value of the business, so long term activity needs to have been devoted to grooming it for sale. The sale could be to the open market or to the existing managers or employees.
A succession plan is essential to securing the future of your business. Without a plan, the future of your business will be left to chance once you've gone.
A succession plan is vital and will help you to:
maximise the value of your business if you decide to sell;
unlock that value by enhancing the marketability of your business; and
exit your business with maximum profitability and the foundations laid for its continued success.
There are no rules about what your plan should cover or the level of detail it should contain. Among other things your plan will depend on your objectives, family situation, financial position, health and age.
Your plan should be realistic, workable and developed with input from groups and individuals who have an interest or share in the business. You should also talk to your business advisors such as your accountant, lawyer and financial advisor.
A few questions you may ask in developing your succession plan:
Who will be your successor?
How much is your business worth?
What sort of management strategy should you adopt for existing staff to ensure a smooth transition?
How will your departure affect key business relationship such as suppliers and major customers?
Do you need to establish an estate?
Do you need provisions for active and non-active family members?
How much income do you need to retire/leave the business?
Business succession should be a part of your long term business management. Value is not built overnight and will only grow as with anything enduring and worthwhile through the compounding benefit of continuous focused effort.
Start today, benefit tomorrow.