Developing a Succession Plan for Your Business
Research by Xero has shown that three out of four New Zealand business owners are intending to sell their businesses in order to fund their retirement. However, 30% of these people don’t think their businesses can survive without their help. And 47% of these business owners don’t have a succession plan ready.
Every hard-working business owner in New Zealand reaches a moment in their career when they think – is now the right time to sell my business and retire? That’s when another more critical question comes into play – how should I develop a succession plan? This plan is essential to ensuring a profitable sale and a viable business legacy that continues to grow and succeed in your absence. Here are some of the core factors to consider for developing a succession plan for your business.
Get help from a financial advisor
A financial advisor can help you to work out your financial and life goals and then generate a tailored succession plan for you. Share this information with them and they will assist with planning how the business will operate once you take a step back. Collaborative Consulting offers financial advice on how to transfer your business to other senior members of the team, or to the next generation of your family. A key consideration is if you would like to remain working in the business, continue to hold shares in the business or exit completely.
The process of succession planning isn’t something that can be arranged overnight. Instead it may require complex strategic consultation with an expert. As a business owner, you need to:
- Develop a clear timeframe for the sale.
- Develop clear communication with all stakeholders involved in the sale, including your financial advisor and key senior members of the business. Ensure that you document the steps taken in this process clearly.
- Get financial records in order so that a prospective buyer can see the value in the business and its performance.
- Develop a clear understanding of all liabilities and assets to help with the business valuation.
- If the sale involves family members, have these people involved early on in the decision making.
Stepping back from the business can be done in a variety of ways. You could pass ownership to a younger, senior member of the business. This ensures that you can pass on all knowledge and provide adequate opportunities for the staff member to get familiar with key clients and important duties.
Allowing key staff to buy-in to the business is a great way to incentivise and motivate them. This allows you to step back and refocus on priorities of your own. A final strategy is to prepare your business for sale to investors or independent buyers.
Throughout the process of planning succession, you should consult with a financial advisor with many years of expertise in steering business valuations and retirement planning towards profitable outcomes. Speak with Collaborative Consulting today.