In brief - An alarming 70% of business owners do not have a
business succession plan
Early death, permanent physical disability, terminal illness or
loss of mental capacity are all terrible fates, but they can befall
anyone regardless of their age or occupation. For those of you who
have spent many years building up your business, it is important to
ensure that should bad fortune of this nature strike, a strategy is
in place to ensure that whoever succeeds you in running your
business doesn't spoil your legacy.
Business succession plans enable the smooth transfer of
leadership and ownership
Planning for business succession is apparently not a high
priority for business owners. According to recent reports, your
average SME owner is 56 years old and planning to retire sometime
in the next ten years.
Alarmingly, up to 70% of SME owners do not have a business
succession plan, presumably taking an ostrich-like approach to the
consequences of their own inevitable demise. Not only will this
oversight leave your would-be successors in the dark about how the
business should be run when you are no longer around: it could have
profound consequences for your business and unravel years of hard
To avoid this, it is imperative that you create a business
succession plan which enables the smooth transfer of leadership and
ownership to a suitably prepared next generation. The aim is to
ensure that your business has a clear strategy and framework for
its successful operation well into the future.
Who should you choose as your successor?
The creation of a business succession plan requires careful
thought about who will take control of the business and how and
when this happens. However, in the course of making these kinds of
decisions, you may have to navigate a minefield of emotions such as
envy, insecurity, resentment and disappointment. The "golden
child" you thought might carry on the family legacy may not
wish to make a long-term commitment to the business. Worse, you may
not be able to identify a viable successor at all.
This doesn't mean you should shy away from preparing a plan.
Far from it. Through lack of careful planning, 70% of family
businesses do not survive into the second generation. Of those that
do, just 12% are still viable into the third generation and merely
3% operate into the fourth generation or beyond.
Five things you can do to devise a plan
Get thinking. What sort of arrangement gives
your business the best chance of succeeding well into the future?
Will you hand the business on to a family member or trusted
employee? Who do you have in mind and why?
Be realistic. Do your potential successors
truly have the business acumen and real interest in the business to
do the job, or are they distracted by other pursuits? Consider the
strengths and weakness of candidates carefully and objectively
before you tap them on the shoulder.
Engage. When you have a strategy outlined, test
your likely successor's interest and seek their input. Engaging
them in preparing and implementing a succession plan will ensure
that everyone has a common understanding.
Teach, don't preach. Once you have a plan
in place, get your would-be successors more involved in the
company. Sitting back and telling stories about the good old days
might not have much practical benefit for the business. Take time
to teach them the ropes.
Dial an expert. There are numerous structures
available to protect both your business and your legacy. A
professional advisor will be able to assist you to identify which
will work best for your business. You'll also need tax advice
and to ensure that your personal estate is in order and aligned
with your succession plan.
Giving serious thought to the future of your business and your
exit from it at an early stage will ensure your legacy is not only
protected, but championed by your successors well into the
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