Succession Planning
Effective Succession Planning is extremely important to your business. Getting it wrong will carry a high cost for you personally and the value of your business.
At Cleary Hoare we believe Succession Planning should be broken down into four very important elements:
- Developing a strategy to ensure that any untimely exit of a key person does not destabilise the business for the ongoing owners.
- Creating systems, and locking in key contracts, to reinforce true value of the business.
- Developing a plan on the best possible exit strategy for you to realise the value of your business.
- Ensuring that you gain access to all available Capital Gains Tax concessions (up to $4,000,000.00 tax free can be accessed).
Unfortunately we have seen too many private business owners suffer unnecessary and significant losses due to ineffective Succession Planning. Businesses can become paralysed by the unplanned and unexpected exit of a Partner, substantial tax benefits on a sale of business are missed due to poor structuring, and retirement plans are shattered due to much lower that expected business valuations or lack of potential exit strategies.
Here are some critical questions to ask yourself or, even better, discuss them with your business partner and compare notes:
- How much do you believe your business to be worth if you were to sell it?
- How do you expect to realise the value of the business? Do you have a potential buyer in mind?
- If you were to sell the business today what access would you have to the Small Business Capital Gains Tax Concessions?
- Is the business totally reliant on the personal skills of you and/or your business Partner for its profits? Without you, is there actually a business to sell?
- If you were required to buy out your co-owner’s share, which financial resource would you use?
- Does your current life and key person insurance policy/s cover the debts of the business?
- If you passed away suddenly what role would your spouse and/or family want to play in the continuing operation of the business?
- Do you have a legally binding agreement in place with your co-owners that guarantees the fair and equitable treatment of your spouse and/or family, regardless of which options they choose?
- If your business Partner passed away suddenly would you want to work with the inheriting relatives of your co-owner?
- At what age do you wish to retire? How?
To discuss and "work through" these critical questions with your family and co-owner/s please click on the below link to print a copy of the Business Survival Quiz. You maybe very surprised at the results.
Business Survival Quiz (Colour)
Business Survival Quiz (Black and White)
It does not matter what life cycle stage your business is at, succession planning is a process that develops with the business. True succession planning requires an individualised solution, to ensure your specific needs can be met. The key is to have a plan in place before an accident happens or a situation arises. In many cases significant value is lost due to the lack of planning for the unexpected.
Examples of available Cleary Hoare solutions:
- Separating company owned assets without CGT for the benefit of separate children
- Effective structuring and funding of employees to purchase the business
- Buy/Sell agreements to ensure value preserved for the family
- Business restructures to ensure all CGT concessions are available
- Equalising your estate value amongst your beneficiaries
- Splitting Trust assets into separate Trusts without CGT for the benefit of separate children
To view, print or save a Succession Planning Facts Sheet please click on the title:
Succession Planning Facts Sheet (Colour)