Starting a business is a momentous event in any small company owner’s life. What follows is a long, consistent effort to make the business a success and keep it that way. But when it comes to deciding what to do with that company when the founder has had enough, more thought and energy is required. Small and Medium enterprise owner’s say business planning is their biggest concern while succession planning is their second biggest worry.
A business can be all consuming mentally, physically and financially. An owner’s home and superannuation are often tied up in the companies capital and if they want to release that capital they need to put a strong strategy in place very early.
Many might have an idea about succession in the back of their mind but those that make a plan will incorporate it as part of the due process and have a proper rigorous think about it. There are two aspects to succession, managerial succession where you recruit talent into the business to grow it, or to eventually run it, and how to release the capital invested in the business so you can retire. No matter how small your business operation is it is advised to seek external advice from an expert business consultant or a trusted mentor.
You could possible have a catch up every three, six or even twelve months to speak about how the business is going and what your options are.
It is important to have a solid understanding of exactly how much your business is worth and if you are planning on selling it, do not leave it too late. People sometimes have an opaque view of what their business is worth. You might be forced into selling it sooner than you would like, due to illness or financial misfortune. That creates pressure and you may have to sell it at a value that’s less than what you were hoping for.
So you need to start as early as possible you need to start diversifying your investment which is hard when you are investing everything into a growing business. That might include adding money to savings, superannuation or an investment property.
Planning well ahead is the key to an effective succession plan.
In a family business you need to be thinking at least 40 years ahead.
If you do plan to pass the business on to the next generation, or hire an external chief executive to run it, you need to make sure the founder has a role under the new leadership.