The 4 Big Succession Issues
The succession process can be difficult to implement, particularly when business owners hold off until the last minute to pass on the reigns. Based on our research, there are 4 major issues concerning succession that must be considered in order to maximise value and successfully transition away from the business.
1. The ability to generate adequate financial returns
One of the strongest arguments you can place in front of a buyer that you have a business worth purchasing, or investing in if you choose to implement an Employee Share Ownership Plan, is a history of predictable, secure and sizeable returns to justify the outlay.
2. The financial capacity to retire
When the Aged Pension was introduced, life expectancy was approximately 64. Now, being closer to 80, the government has been at pains in the last 30 years to shift that burden back to the individual. If you are relying on your business to fund your retirement, the smartest thing you can do is start preparing as early as possible for this. Begin with the end in mind.
3. Trust in the abilities of the potential successor
The world changes, a new way isn’t necessarily a bad thing. Children need to be able to make mistakes to grow into happy, functional adults. It’s no different with successors – they need the latitude to make mistakes or they won’t grow into seasoned business owners, like you.
4. Potential successor’s interest in the business
Once upon a time, the routine thing was for the eldest child to take over a business. The stats have changed, only about 14% of businesses go to the second generation, and 4% to the third. It is perfectly fine to look further than your own family to find that successor who really has a desire to take the reigns of your business.
Regardless of whether your succession plan involves transferring ownership to a family member or key employee, or finding the right buyer, addressing the 4 big issues of succession will undoubtedly make this transition a successful and positive experience.
Leave on a high note.