Expert Advice

Succession planning: who is taking over your business?

Karyn Starmer3 May 2021
Father and son working at butchery

Does your business have a succession plan? Photo: File.

After a year of disruption and hard slog, most Canberra businesses are slowly beginning to see the light of day. But after everything businesses have been through, lawyers and financial advisors are reporting more owners are thinking beyond this year or next and considering their life beyond business ownership.

Snedden Hall & Gallop’s senior associate and succession planning specialist, Emily Shoemark, says the drought, bushfires and COVID-19 pandemic have brought an increase in enquiries for assistance and advice with succession planning.

“The shock of the disruption has brought home the importance of good business systems and planning, and that includes having an exit strategy,” she says.

“Businesses that have seen big changes … solid teams working together were suddenly scattered with employees working from home or stood down, while businesses were still carrying debt and dealing with unpaid invoices and supply issues – these are all big responsibilities. It has clearly got people thinking, ‘What if I wasn’t here?’

“Owning a business involves myriad obligations and responsibilities that all need to be unpicked if you decide to sell or leave, and it’s best done with careful planning and preparation.”

Succession planning is often regarded as a way to pass on the family farm, or for entrepreneurs to prepare a business for a quick turnaround, but Emily says succession planning covers a wide range of business contingencies, from ensuring a smooth handover if key staff depart, to negotiating the sale of the business.

“Succession planning is more than preparing to hand over a business to a family member; it is a well crafted exit strategy,” says Emily. “Business owners and their successors will do better if they plan ahead so that when they exit the business either on retirement or in an emergency, such as sudden illness or death, there is a well documented and clear process for the sale or handover of assets.

“If you develop a good succession plan, you can transition out of your business more easily.”

Emily Shoemark from Snedden Hall & Gallop

Emily Shoemark is a senior associate specialising in business advisory services and employment law at Snedden Hall & Gallop. Photo: Michelle Kroll.

Business owners can begin succession planning years ahead of time. This will help to meet future needs and help the successor prepare for their present and future work responsibilities.

Emily says there are a number of things to consider when developing a succession plan.

“Your successor could be a family member, an employee, a business partner or an outside buyer,” she says. “Make sure you consider what is best for your business. Ensure your successor has the skills and that they want to take over your business. We see plenty of cases where family members are not ready or even want to take over the business.”

A complete succession plan will include a method to value your business and cover areas such as your successor’s responsibilities and any financial or legal issues.

“If you are selling your business or gifting it, any financial implications need to be considered well in advance,” says Emily. “The successor may need training, you may need to transfer licences or registrations, or hold licences, and the business structure may need to change.”

The key is to ensure your succession plan is realistic and achievable.

“It’s important to consult a professional when you are developing your succession plan,” says Emily. “A succession specialist can help identify any financial risks or opportunities and ensure you have covered everything.

“Don’t think it is too early to start planning. Have the conversations now. Yes, as time passes your circumstances may change, but a succession plan will ensure you’re always ready in the event you need to leave earlier than you anticipated.

“So many good business people focus on building up a solid and profitable business, but they don’t always think about their legacy. When the time comes to leave, you want to be able to simply hand over your business and step aside without too much disruption to the business, the customers and the employees – and leave a lasting legacy for your successor.”

For more information about succession planning, contact the business advisory team at Snedden Hall & Gallop.

Original Article published by Karyn Starmer on The RiotACT.

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