FocusOn - Business Succession - Are you on track?
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Few owners make their business sale-ready by taking the time or trouble to invest in resources, or undertake "necessary housekeeping". As a result, significant gaps exist in the planning (strategy), financial, human resources and operational areas of the business. These gaps serve to discourage purchasers from paying full value, especially if they are looking to buy the business as a going concern. |
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More than 1/3 of SME owners are aged over 50. As the baby boomers retire over the next 10 years or so there will be an imbalance in demand and supply for SMEs. Only 15% of the population are currently in the 35-45 age category. |
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These factors suggest that only profitable and well run businesses will attract premium value. |
Why succession planning is important
Research has indicated that fewer than 30% of SME/family businesses have a realistic succession plan in place. This creates the potential for many Australian businesses to fail or not realise their full potential value.
The process involved in ownership and management succession requires time for implementation. It is complex as many different business, financial and personal issues come into play.Many clients are seeking advice too late to maximise the effectiveness of this transition.
What to do – Embark on a strategic approach
True succession planning begins with an evaluation of business performance. This allows for a range of sensible options to be developed, including an assessment of the financial benefits of a carefully thought through succession plan, as opposed to an exit through a hasty alternative.
A good succession plan will look at a range of issues such as personnel, resources, corporate structure, family and industry dynamics, estate planning, insurance and drivers of business value to name a few.
Vital to the plan is the identification and grooming of future leaders and key skill requirements. Responsibility for grooming the next generation belongs to the experienced business owners. Entirely new sets of skills and responsibilities need to be defined and mastered by new leaders. This is a process which is aided by careful planning and time dedicated to developing prospective leaders, such as shadowing, training, mentoring and feedback.
There is a huge difference between the efficient day to day operation of a business and the preparation of that same business for transition. It is easy to be lulled into a sense of false security that "when we are ready to sell/transition, the principles that have contributed to our success will stand us in good stead for sale".
Getting help
Saward Dawson can provide a current assessment of the effectiveness of the planning, financial and human resources practices of your business. We can provide you with key actions that need to be taken to get your business ready for a smooth succession and to maximise its value.
We work with business owners to map out a succession plan for their business which meets their unique needs. We act as a sounding board and advisor for incumbents and successors. We can play a mentoring role to business owners who often experience difficulty in embracing change. We also work productively with successors who may have different expectations.
Existing economic conditions, competitiveness of global market forces and structural change in Australian industry suggests that only efficient and well run businesses will prosper and yield real value to the owners.
We believe that only those who act early, seek good advice and commit to implementing the necessary change will ensure a smooth transition and achieve full value for the sale of their business.
Don't leave it too late. Even if you are not considering an imminent change or transition act now, this process often takes up to 5 years to ensure effective outcomes.
Published : February 2012