Successfully positioning your business for the future in terms of growth, succession or exit is crucially important for all businesses regardless of size or stage in the business life cycle. Without planning, business owners assume significant financial risk that translates into missed opportunities, wasted potential and an inability to transition ownership or maximise price upon sale. So, what’s your plan?
Why should you be interested?
Whether you are approaching retirement, planning to pass on the family business to the next generation, taking on a partner, wanting to take a more passive role in the business, preparing the business for sale or just generally trying to consolidate or grow the business, a business and succession plan specifically tailored to your business will ensure that your goals, priorities and direction are clearly defined. More particularly, business and succession planning is important for the following reasons:
Exit strategy: For every business, a change in management or control is inevitable and unavoidable. There are numerous reasons why a business owner may have to stop working including death, illness, disability or retirement to name a few. These changes can be gradual or sudden and unforeseeable. To ensure that your business is successful without you or to maximise the price of your business upon sale, it is essential to have a robust plan in place well before any change, particularly where the change may be involuntary or unexpected.
Loss of talent: The business will risk losing talented employees who are so desperately needed to take the business forward if there is a lack of career advancement and ownership opportunities. In addition, by identifying and grooming key employees, the business becomes less reliant on the business owner who will be free to focus on the strategic direction of the business. Further, the possibility of career advancement and ownership opportunities will reduce the likelihood of key employees leaving to set up competing businesses or getting snapped up by the competition.
Growth/investment: Ageing business owners may make more cautious investment decisions which stifles growth and ultimately results in under performance. Similarly, business owners who are unable to hand over the day-to-day operations of the business risk stagnation and eventual decline of the business. By harnessing the enthusiasm and skills of key employees, business owners are free to build the business or focus on personal goals.
Loss of knowledge/experience: A loss in market competitiveness is inevitable where exiting business owners take all of their knowledge and experience with them. Planning for the transfer of that know-how in a structured manner is essential. A business that does not rely on the exiting business owner will be independently successful and will command a higher price in the market.
When to start planning
It is never too late to start planning. Business and succession planning is a process and there is no “one-size-fits-all” solution. The key is to tailor a solution specific to your objectives and requirements. Seeking input from advisors will help to focus and steer the process. Having established a plan, committing to it and reviewing it regularly will ensure that it remains current and relevant to the business and any opportunities or changes. The sooner your business has a plan, the sooner you will be in control of where you and your business are heading.