Succession Plus use a proprietary 21-Step process to implement a successful strategic succession plan:

Business succession planning and exit plan


Business Succession Planning:

What, Why, When and How?

Business strategic succession planning was practically unheard of 10 years ago. These days savvy business owners understand that succession is a significant aspect of the success of their business. In his book The Seven Habits Of Highly Effective People, author Steven Covey says his second habit is to, “begin with the end in mind”.

In the book Covey goes on to say, “If you want to have a successful enterprise, you clearly define what you’re trying to accomplish…the extent to which you begin with the end in mind often determines whether or not you are able to create a successful enterprise.”

Business owners must be prepared to make every decision considering whether it brings them closer to or further away from the ultimate exit strategy.


What is strategic succession planning?

Strategic succession planning covers all aspects of the business, but importantly it focuses attention on the final outcome. What are you actually trying to build within your business? Is it something to fund your retirement? To list on a stock market? To raise further capital and grow? To pass on to other members of the family?

Strategic succession planning means you have a detailed and documented plan covering every aspect of your business that continually moves you closer to your ultimate exit outcome. However, most business owners are so caught up in running the business at a day to day level that they do not have the time, effort and attention to focus on the end outcome.


Why strategic succession planning?

Investing time to develop a strategic succession plan is one of the most important financial decisions a business owner will ever make because without one the value in the business will retire as soon as they do.

In Australia more than 50 per cent of business exists are currently a failure – a result of bankruptcy, liquidation, death or serious illness, divorce, or simply walking away and locking the doors. This is largely because no succession planning has been undertaken by the business owner.

A survey conducted by the Monash University Family and Private Business Research Unit revealed that over the coming decade 60 per cent of private business owners are approaching retirement (the first baby boomers actually turned 65 in 2011) and the ensuing transfer of ownership of assets and business equates to approximately $607 billion.

Approximately one third of Australian family businesses  are expected to change CEOs over the next three to four years, and whilst 53 per cent are sure that the successor will be a family member, 83 per cent do not even have a succession plan in place.

When is the right time for business succession planning?

In my view, strategic planning is all about time. The simplest analogy is to ask whether or not you would consider approaching a real estate agent today with a view to selling your property this coming Saturday.

Most real estate agents could actually achieve this, but without any time to market the property, prepare the property for sale and review their database of buyers, the price they achieve will not be the real value of the property.

From my experience, most businesses require a minimum of five years to maximise the value and prepare themselves to extract that value successfully. We often see stories in the business media of well-known wealthy entrepreneurs making substantial money “trading” in businesses. They invest, build or grow the business, reduce the risk, and then exit profitably, making substantial gains on the investment over a few years. This is the best illustration of getting the exit strategy right; it is the ultimate test of success for these investors. If they don’t exit correctly they make no money!

How strategic succession planning is done

Succession Plus use a proprietary 21-Step process to implement  a successful strategic succession plan:

Stage One – Identify Value

Step 1: Goals and Outcomes

Step 2: Fact Find

Step 3: Stage One Insights Report

The first stage of our process is to identify what will be required in terms of retirement planning and financial needs going forward as well as what exists currently in terms of business values and personal assets. Our initial Stage One Insights Report includes a comprehensive review of both business and personal situations to ensure we can maximise the outcome.

Our Stage One Insights Report provides detailed findings and recommendations based on a comprehensive review of your business and includes a unique “reverse due diligence” process whereby we take a fresh look at the business from the same perspective that a buyer might take and analyse the business risk in terms of documentation, compliance, legal, HR and other issues – to ensure the due diligence process does not cause problems with any future transaction. The 50 page report includes detailed recommendations and suggests changes to your existing business structure for ease of operation, flexibility and effectiveness in terms of taxation outcomes and the ability to provide for future transfer of ownership. The report includes a comprehensive financial analysis and scorecard which highlights any area within the business that requires further development or improvement.

In addition we analyse non-financial KPI’s – these are areas of business operations which will have a direct effect on the risk weighting that we provide as part of our business valuation and therefore any improvement in these areas will improve the valuation of the business overall.

As a result of this detailed analysis and a 3 hour workshop to discuss priorities, exit options and owners goals, an implementation plan and timeline is prepared to manage the various projects that result from this detailed analysis. These projects are then facilitated over a 12-18 month period by one of our strategic advisors.


Stage Two – Protect Value

Step 4: Financial Planning

Step 5: Unplanned Events

Step 6: De-Risking

Often we find inappropriate ownership structures which do not protect assets effectively and which do not reflect owners financial planning and lifestyle goals in terms of long term wealth and asset management. Our financial planning process determines the funding required for retirement or after exit and the most appropriate structures to own that wealth.

In addition, our plan needs to manage the risk of unplanned events in terms of accidents, sickness and even death. Our process includes the review of existing risk management and the implementation of legal agreements to govern the outcomes.

C-MAC Industries (Aust)

Winner of the 2012 ESOP of the Year Award for SME/Succession. With the introduction of a Peak Performance Trust in June 2011, C-MAC Industries (Aust.) Pty Ltd have already seen an 18% hike in productivity at the plant.

“People are saying ‘us’ instead of ‘me’”
- Steve Grlyak – Manufacturing Manager


“Employees are keen to climb the ladder of equity – but someone needs to provide the ladder”

Stage Three – Maximise Value

Step 7: Exit Options

Step 8: Strategic Planning Business Model

Step 9: Strategic Financials

Step 10: Systems & Procedures

Step 11: Marketing & Sales

Step 12: Corporate Governance

Step 13: Ownership Thinking

Step 14: Peak Performance Trust

Step 15: Management Succession

Typically our clients work with a senior advisor in order to improve these ratings and therefore increase the valuation of the business so it better matches their retirement planning outcomes.

A dedicated advisor is assigned to each client who will work to review strategic exit options and agree on the most appropriate strategy given the clients timeframe and financial position. This will result in the development of a strategic plan which maps out the strategic initiatives for the business over the next 5 years. They will use benchmarking to identify growth and performance improvements and whilst implementing the key recommendations from our Stage One Report will project manage a restructure (if required) as well as reviewing risk issues including insurances on key people and assets.

Many of our clients have experienced a dramatic improvement in performance through the adoption of an employee incentive plan such as our Peak Performance Trust (a specifically designed ESOP for use as part of our business estate and succession planning process) which is designed to attract, retain and motivate key staff within the business – ultimately leading to an increase in value. Our clients have found also that the Ownership Thinking management model, either dovetailing with ESOP implementation or standing alone, empowers key staff, eradicates entitlement thinking and through a series of Rapid Improvement Plans, shows very real improvement in productivity and profitability.

This process also identifies the most appropriate buyer – a listed company as a purchaser or a strategic sale can often double value.

Stage Four – Extract Value

Step 16: Management Succession

Step 17: Documentation

Step 18: Liquidity Event

This stage involves implementing the agreed strategy, once all of the restructuring and value enhancement projects are complete, to ensure we extract maximum value.  Depending upon the most appropriate strategy, this stage will involve transactional issues like legal advice, CGT & taxation and accounting – a project manager will coordinate all aspects to ensure our strategic approach is maintained to maximise the outcomes and ensure they are aligned with retirement planning objectives.

The preparation of a detailed Information Memorandum and Due Diligence documentation is an important aspect of maximising value.

At this stage also, including the benefits of a self-managed superannuation fund strategy is important to ensure (as we move into the wealth management phase) that appropriate structures are used to assist with the transition to retirement.

Stage Five – Manage Value

Step 19: Ongoing Investment Planning

Step 20: Asset Protection

Step 21: Estate Planning

This process focuses on managing the wealth we have been able to extract (proceeds of sale, employee share plan, capital raising, merger etc.) to maximise the performance of passive income, minimise any risk areas, protect assets and utilise the taxation and retirement planning benefits of self-managed super funds.

Sample of a typical Strategic Advisory Implementation Plan

Business succession planning template