Finally making that sea change? Embracing retirement? Taking your career down a different path? It sounds like it’s time to create a succession plan! This month, consider Core Business Brokers your guide to successful succession planning, as we break down the elements of a succession plan so you can prepare yourself for the next step.
A succession plan is a detailed plan that outlines the steps a business will follow to allow you, the current owner to successfully step away, handing over the reins to the new owner – with minimal disruption.
A well-constructed succession plan will:
- Prepare all parties involved for change
- Allow the current business owner to transition out of the business with ease
- Allow the new business owner to transition into the business with ease
Your guide to successful succession planning
Step 1: Who is your successor?
It could be a family member, a business partner, an employee already involved in the day-to-day operations of the business, a similar business who is looking to grow by acquisition, or an unrelated business buyer. Identify who your possible successor is, what skills they currently possess and what skills they may need to acquire to step in and take over seamlessly. If you believe that your business will appeal to larger corporate buyer, ensure that the functions you perform are adequately covered.
Step 2: What remains the same?
Consider what aspects of the business are to remain the same. From business structure to employees, services and products and more – break down the business operations and list everything that will remain and continue despite the business handover/sale.
Importantly, have a discussion with your Accountant to consider any Capital Gains Tax consequences, which may have a bearing on the structure of the sale, i.e. a share sale, as opposed to an asset sale.
Step 3: What is changing?
Now that you’ve identified what elements of the business will remain, it’s time to identify which ones will change. Key personnel changes, structure, registrations, insurances and legal considerations are all elements that may require changes when the handover/sale takes place (again depending on whether it is a share sale transaction).
Step 4: Succession timetable
When will each step of the succession plan take place? From new owner upskilling to legal transitions, operational changes and employee notifications. Consider each step of the process and when it will occur. This aspect can take months so the better prepared you are the easier it will be in the long run.
Step 5: Organisation & financials
Make sure all aspects of the business are neat, tidy and organised – ready for the new owner. Ideally a data bank of information should be created that will allow for an audit trail for the buyer’s due diligence to be conducted. Consult your Accountant to ensure all financials are prepared and finalised, as well as operations manuals, risk management procedures and any other aspects of the business that will assist the new owner during the initial stages of ownership.
Step 6: Sale details
With the help of your Core Business Broker, determine the accurate value of the business and finalise the sale details. Meet with your Accountant to finalise taxation requirements and your next steps (i.e. retirement plan if applicable).
With over 85 years’ experience in the industry, our team can assist you with your succession plan and exit strategy, mitigating risk and allowing the most seamless transition possible.