If you have worked a lifetime to build up a successful business, then you may be reaping the rewards of your success as you steer the organisation towards further growth. While you may be caught up in the day-to-day operation of it all and be fairly happy with not just current business but future trends, are you overlooking something very important that could cause you significant issues in the future? In particular, do you have a plan in place for the takeover of the business when you're not around? If not, you need to put in place a formal succession plan. What is involved?
Risks of Inaction
Of course, nobody knows when the "day" will come and the key stakeholder of any business can effectively disappear at any time. Without a succession plan, the entire business could be at risk or at least part of its value could be compromised. You will want to be sure that your nominated successors will be able to take control of the business seamlessly, without any hidden surprises.
Sale or Retirement
Of course, while death or serious illness can force the issue, you may also be considering your retirement at some stage in the not too distant future. In this case, you may wish to sell the business as a going concern but will nevertheless need to have a good exit plan in place to take care of these eventualities.
When you start developing a plan, you will need to determine whether you are completely handing over the reins, or whether it is just partial succession. This can affect all the other elements of the plan, and you may choose to come up with two different alternatives to cover all eventualities. Who is going to be the successor? Will it be a family member or an existing business partner or will it be a third party altogether in the event of a sale?
Personnel and Skills
When it comes time to hand everything over, will key personnel be included in the transaction? This can sometimes be critical as a variety of learned skills may be needed to give such a business its true value. How much of this can be guaranteed in your succession plan?
You need to talk with an attorney to work out all the legal considerations and to draw up the paperwork with necessary agreements. You may also have to incorporate this plan within your will, so that it can be implemented in the unfortunate event of your demise.
Finally, and most importantly, what are the financial implications? You will need to set a fair sale or transfer price if the business is going to be sold to third parties, and you will also want to consider carefully the tax implications, not just for yourself but for other members of the family if you're keeping everything "in-house."
Always bring in qualified tax accountants to advise you at every stage of your planning process.Share