All businesses need a succession plan. It is one of the most important steps you can take to protect your business. A succession plan avoids future conflict and can facilitate changes, expected or unexpected, to the structure of the business, such as a departing partner.

Having an exit strategy in place can allow for a smooth transition, particularly when partners are unrelated and active within the business.

Succession Plans are crucial to a family run business

For a family run business a succession plan dictates how the ownership structure of the business will pass hands. It can allocate funding arrangements for family members to enable and implement changes.

One of the biggest issues families face is succession, especially if some of the children are involved in the business and others are not. Careful consideration of the business, individual family members and any future beneficiaries must be made.

It’s often a complex area for families to plan for but experience dictates that the best outcomes are where plans are made early and discussed openly with all family members involved. You’d be surprised how much red tape and angst can be avoided simply by making a succession plan. The best advice is not to wait until a potential issue arises. Do it now.

Managing expectations while you navigate the options and construct a plan

The key to successful succession planning is first off getting started – simply seeking professional advice and establishing involvement and communication between all stakeholders. Correctly approached, it takes time. Your main objectives might be to construct a viable plan for:

• The business itself
• Any business partner stepping down
• A workable plan for new business partners
• A plan for all family or business members

Managing expectations is crucial to ensure that everyone feels valued and has had the chance to provide input, with all expectations made known and dealt with.

Once a plan is in place it needs to be documented, reviewed and have action areas implemented

The benefits of this process are invaluable to the long-term sustainability of the business.

What should your Succession Plan include?

There will be items specific to your family or business circumstances, but generally any plan should include:

• A detailed account of what will happen to the business when a partner departs
• A management and ownership transition plan that is agreed to by all partners
• A viability and profitability plan to support any changes to the business structure
• In the case of a family run business, estate equalisation solutions for any children not involved in the business
• An analysis of current structures and any new required structures considering tax exemptions, concessions, CGT or duties discounts
• Funding arrangements to implement changes
• Estate planning to complete the circle, ensuring it is in accordance with the succession plan
• It is critical that any advice provided to you about succession planning is given in a collaborative manner with your financial planner, accountant, lawyer and financier.

At Elston, we work with you to successfully formulate, agree to and implement a Succession Plan tailored to your needs and requirements.

Questions? To arrange a complimentary obligation-free meeting with the Elston Succession Planning specialist team now, contact us or phone 1300 elston.