Information and a template to guide you in creating your succession plan
You’ve built a business you are proud of and that fills a need in the community, but there will come a time when you decide to move on to new projects, step back or retire. You may look to pass the business on to someone who can continue and build on your hard work.
Succession planning may not be something you have needed or had time to think about so far in your business journey, but it is worthwhile considering what the future of your business will look like when you step back from it. There will of course be emotions involved when thinking about passing on your business, and the process of planning and the transition itself can be a source of stress and anxiety. In particular, succession planning in family businesses can be emotionally challenging, with the potential to strain relationships and add stress with the discussion of ensuring future family income.
Benefits of having a succession plan
Having a succession plan in place ahead of time can help ease anxiety, and mean that everyone involved is prepared. You do not necessarily need to have an individual lined up to be your successor, but the plan will include any information needed for someone else to take over the business, logistics on how to manage the transition, and can be updated over time.
Creating a comprehensive succession plan can be a lengthy process, but it is much less stressful when it is carried out before it is needed and can be tackled a little at a time. Importantly, start thinking and discussing early, and continue to communicate with those involved.
Steps to guide a successful succession planning process
- Choose a successor – this may be a family member, employee, business partner or outside buyer. Consider what is best for your business and ensure your successor has the skills or potential, and wants to take over the business. Invest in development and training so that potential successors are ready when the time comes.
- Value the business – online calculators are available to help you in valuing your business. These take into account things such as business assets, liabilities, market trends, future profits, return on investment etc. It can also be worth having an external valuer help you with this. Your accountant or business advisor can assist or point you in the right direction. The value of the business will need to be reviewed over time to ensure it is current.
- Consider logistical issues and develop an action plan – document any business tasks that need to be handed over and how this will occur, as well as any financial and legal information regarding the business transfer and people involved. Consider risk and change management, for example how to manage the transition of client relationships and existing employees.
- Seek professional advice – in particular with regard to family succession planning, there are ways pass on or divide businesses and responsibility to ensure all parties feel equally treated and are comfortable with the decision. Mediators and rural advisors are available to help.
- Keep the plan current – you may need to review the plan regularly if it is set up in advance. Ensure those who need to know about the plan have a copy or know where it is located.
Managing stress throughout the succession planning process and business transition
Self-care is very important during times of stress and periods of change. Remember to take time to do things you enjoy and take care of yourself by making sure you get enough sleep, exercise and eat well. These things will all help to reduce your stress levels and support your wellbeing. Spend time connecting with family, and reach out to others for help if you need it. Don’t forget there are professional services and experts available to assist you, such as financial advisors, business advisors and mediators, and rural counsellors.
An article from the National Centre for Farmer Health that provides helpful information and links specific to succession planning for farms
The Australian Small Business and Family Enterprise Ombudsman’s introductory guide to succession planning for family businesses
An overview of the business valuation process
How to manage change and your obligations to your employees with a change in business owner