If you’re looking to sell to a third party, family member or retiring, good succession planning helps you make the most of your estate planning strategies. Having a plan in place applies whether you’ve built a family-run business or other enterprise.
Other questions arise where your business is being passed into the hands of younger partners or the next generation in the family.
How can you, as a retiring owner, receive full value for your hard-earned efforts? And how can the new owners finance their equity in the business? These are questions that can be answered with a business succession plan.
What are the benefits of succession planning?
Succession planning focuses on continued success for your business no matter the issues that arise. For example, you can be left exposed when the personal circumstances of those involved in the ownership or management of your business change through:
- divorce
- illness
- death
- retirement.
Think of succession planning as a big picture examination of your personal and business assets. Responsibilities can be identified and recommendations made on how to manage them under different scenarios.
It’s essential to ensure your assets and entitlements are protected in the circumstances mentioned above. Thinking about these issues gives you more control rather than being reactive when a crisis hits. It also reduces the chance that disputes will happen in high-stress situations.
When to start your business succession plan
Creation of a succession plan should start between three and five years before you’re looking to move on. This gives you enough time to put into place the structures necessary to achieve your goals.
In developing your plan, consideration is given to your goals for:
- family
- wealth
- the business, and
- your legacy.
‘What do you want to achieve?’ is the fundamental question that needs to be answered. A succession plan is then drafted to help you answer that question. By forming a strategy, you can ensure you’re in the best possible position to manage unexpected changes in your business without interruption to your operations.
Some questions you might have on succession planning
A good solicitor will help you work through the following questions when starting a discussion about succession planning:
- who do you want to take over the business?
- what is your business worth?
- When do you plan to leave the business?
- what are the financial implications of you leaving?
- what training is required to ensure your successor can take over?
- what are the legal requirements that must be completed to implement the change?
Keep these questions in mind when it comes time to engaging the services of a lawyer.
Taking action on succession planning
For private, owner-managed, or family-owned businesses, a good succession plan can drive the growth of a business, reduce taxes, and set the stage for retirement. Family-run businesses may benefit further by focusing on preservation of harmony within the family.
And remember, succession planning is an important and evolving process. This is not a subject to be put off until later. To have a successful plan in place, it needs to be an integral part of a company’s business strategy and operations well before you decide to move on.
A good lawyer can work with you to create a business succession plan.
At Lakis & Knight, we specialise in small to medium-sized businesses. Our personalised approach and fixed-fee service offering ensure you have complete transparency regarding your business succession plan.
We’ll spend time to make sure you know what to expect and where you stand when it comes to moving on from a lifetime of sacrifice building your business.
To get started, contact us to book your free, no-obligation discovery session with us today.
