A Will?… in spirit at least!

What would become of your business if you were no longer around?  What would happen if this was to happen suddenly?  What would your family do?  Should the business be sold?  Is it Investment Ready?  Are your people capable and ready to take over?  Is the business strategy robust and understood by all?  Should it be sold?  Who might buy it?  How can value be preserved?

Interesting questions.

Sounds like your business might benefit from a Succession Plan.  For Xmas of course!  A gift for all those stakeholders who rely on the strength, success and continuity of your business.

It is analogous to you doing your own will (yes, I am aware that too many business owners are a little behind there too).

Key considerations for an effective succession plan:

• Does the business have an up-to-date business strategy?
• Do you know the value of your business? Do you understand the drivers of value in the business?  What is the ideal revenue and margin for the scale you have?
• If you were to sell the business to optimise value, what needs to be done?
• How long would it take to get the business to achieve an optimised value?
• Is there a succession for the key people in the business?
• Is the business dependant on you?
• Would your family want to run the business? Would they stuff it up?  Could they keep it?  Is this a key part of your financial legacy?
• Are there family members working (or wanting to work) in the business? What are their expectations?  Are they employable elsewhere?
• Would your management team be good enough for an MBO? Could that be vendor financed?  Where is the security?
• Is a third-party acquisition the only viable alternative? Who might the future owner be?  Do you know who you are?
• How would the succession plan interface to your own estate planning?

These are typical matters to be addressed in a succession plan.  Every privately owned business also brings its own unique set of challenges that need to be addressed in succession planning.  Some issues are business… some family… some personal.  These issues need to be considered, and solutions incorporated into the plan.

As the average age of Australia’s business owners gradually climbs year by year, the need to address the future management, ownership, structure, operation and performance of the business becomes even stronger.

It is easy to put it off for another year!  But the sooner the planning is incorporated, the sooner you can commence the changes in how the business is seen and run.

Chris Alp