How to Succeed at Succession Planning – Part 4

How to Succeed at Succession Planning – Part 4

Succession Planning Part4

Welcome back to the final instalment of this series in succession planning.

Part 4: Drafting your exit plan

You’ll also want to work with a team of planning experts who can provide a business valuation, legal advice, personal financial planning and tax-planning counsel.

Hire a dream team

  • An accountant can help you ensure your structure is optimal, set up SMSF’s or trusts, provide advice on capital gains exemptions, income planning and reduce taxes upon business transfer or sale.
  • business broker can help prepare your business for sale and offer advice on changes to your business name or registration, leases, memberships, licenses and permits.
  • business valuator can help you get the best price for your business and tell you what to do right now to improve value before you list it for sale.
  • financial advisor can offer personal wealth management advice and help you decide how to invest proceeds from the sale of your business.
  • An insurance agent can help update any policies covering disability, death or injury upon your succession – and help manage business risk prior to ownership transition (e.g.) key person protection, buy-out funding, funding of capital gains tax and estate equalization.
  • A legal expert can help with the transfer of business ownership such as the purchase and sale agreement, modifying partnership contracts, updating your will, assigning power of attorney, setting up trusts – and advise on any charitable and legacy objectives.

Why timelines are key

It’s helpful to work toward deadlines for completing your succession plan. Some business owners break their plan into sections, setting firm dates for completion of each one.

Consider breaking your plan down into the following sections:

  • Personal future planning (retirement, lifestyle, estate considerations).
  • Business housekeeping (e.g.) financial/developmental/legal.
  • Successor mentorship/training.
  • Handover and transition.

For each section identify:

  • Brief description or summary.
  • Succession action items.
  • Start date.
  • End date.

Allow yourself a generous amount of time to seek advice and carefully weigh the right decisions. These rough guidelines can help you estimate how much time you’ll need to consider the key elements of your succession plan:

  • Goals – give yourself around three months to outline what you hope to achieve before making your exit.
  • Family interests – allow about two months to decide how to best meet the long-term needs of your family.
  • Wealth – allot one to two months to identify your business’s assets and liabilities and how they’ll be allocated when the time comes.
  • Legacy – spend a month thinking through what you’d like your legacy to be.
  • Advice – now that you have a good handle on your succession goals, take a month to consult with your business advisors, lawyer, accountant, and banker.
  • Plan – set aside a month to document your options and finalize your plans.

You’ll also want to include in your planning document realistic timelines for your planned succession. Set dates for these important milestones:

  • Your exit date.
  • Transfer of share ownership.
  • Transfer of voting control.

A business sale timetable

Although it’s tough to predict how long it may take to sell your business, these estimated timelines give an idea of what to expect.

  • Two years – if you’re well prepared with a strategic plan, and your business is in excellent shape.
  • Three to four years – if you run a family business and plan to hand your business over to professional management – or if your business needs improvement before it’s ready for sale.
  • Five years or more – if you plan to pass your family business on to another family member.

The final test of greatness in a CEO is how well he chooses a successor and whether he can step aside and let his successor run the company.

If you would like help to get started with your succession plan get in touch with Sumz Plus Business Services today!

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