One of Australia’s big 4 banks thought that they knew the answer when we partnered with them in 2002 to help them provide succession planning services to their business owner clients.  They wanted to ensure that the next gens of these family businesses would bank with them too.

After 5 years together where the bank had introduced us to 179 individual business owner clients, we had completed 47 full succession assignments for the bank (as well as many from other referral sources), we knew one thing for sure. Business Succession was different for every person we met.

For just a handful, it was about passing the business to the next generation. The planning process was focused around fairness, transparency and equity. It covered topics such as value, employment of family members, career guidance, family support, payment and funding and ultimately, letting go. Perhaps disappointingly, we found that only a little more than 10% of all referrals ultimately ended in a successful transition to the next generation. And for some of these, succession only lasted a handful of years before that next generation cashed in.

For others, they had simply had enough. Often a previously thriving business, times had now changed. Profits dwindled and debt spiraled. The fun was gone and now it was simply hard work. These owners simply wanted it all to end yet continued on in the same way hoping things might just change for the better.

In these downturn cases, succession will take some time and effort to deliver an outcome that will be better than the current “fire-sale” option. Certainly, changes will be needed. Succession planning is then based more around value building and the exit must be deferred until the improved results can be quantified to prospective buyers of the business. The irony in many cases was that once the business was back on its feet again, the owners decided to stay on and enjoy their newly revitalized business!

Of course, there were many businesses we met that were absolutely ready for succession. The timing was good, the business attractive, and the owners were ready to exit in the next few years.

In these cases, the strategy is more about getting the business “Investment Ready” (akin to painting the house and weeding the garden before selling) as a precursor to a structured program to market the business. In that process, the type of buyer and their strategic position is explored to understand where another party will generate the greatest synergies through an acquisition.

There are a myriad of combinations and circumstances that we have worked with. Yet no two are ever alike. But many face similar challenges in terms of structure, taxation, managing the process, confidentiality, preparing the business, communication, transition, the story and curiously, ensuring that their newly found liquidity is properly considered, managed and controlled with the same diligence and discipline that the asset received when it was a business.