In this series we highlight key actions to help you achieve a smooth transition.
Forward planning is vital for the success of privately held businesses.
Whether in family or non-family firms, business succession has the potential to make or break a business. Managed effectively, it can help a business sustain its
competitive advantage into the future. Managed poorly, it has the potential to see a business come undone rapidly.
Part 1: Establishing the value of your company
In a recovering economy, succession planning is rarely top of mind for business owners. More often, privately held businesses – which include family enterprises, investor- and entrepreneur-owned businesses and professional firms – focus on enhancing cash flow, reducing costs and managing day to day operations.
But enhancing value plays a critical role in succession planning. To structure a tax efficient exit, set up a funding mechanism for successors, justify future cash flow projections, or maximise the proceeds of a sale, you need to establish your business value.
Part 2: Establishing your goals and objectives
In some cases, owners may assume that their partners, management, staff, shareholders and family members understand their intentions for the future even if they have not been articulated. In others, owners may rely on their personal judgment to such an extent that they implement succession plans unilaterally, without consulting with the affected parties.
In either case, this failure to establish clearly defined and measurable goals that take the needs of all your stakeholders into account can lead to disputes and business disruption.
To avoid these consequences, you need to create well framed succession planning goals and objectives, align them with your business strategies and goals and communicate them with both your business and personal stakeholders.
Part 3: Identifying and incentivising successors
Who to choose? That is the question facing an increasing number of individuals seeking to transfer ownership of a privately held business.
While privately held business owners and managers are usually adept at dealing with change, the same cannot always be said for identifying and grooming their successors.
Part 4: Exit strategy
Now more than ever it is important for business owners to consider their succession planning options and the future of their equity.
This process must begin well in advance of putting up a “for sale” sign. The best outcomes for business owners will come through careful planning and preparation.