Originally Written: 9 Nov 2021 | Last Updated: 11 Aug 2023
Advivo Business Advisors and Accountants share their insights on planning your business succession to ensure a smooth and successful process.
Succession planning can be intimidating and sometimes overwhelming, in many cases, it is a family business that has been built from the ground up and it can be hard to see the forest through the trees. That’s why we’ve put together a number of tips to help you along with the process.
1. Determine your Goals and Motivations
Whether you are growing, exiting or stepping back from your business, you will need an effective business succession plan. An effective succession plan will help your business transition smoothly to the new owner, so by planning your exit early, you can maximise the value of your business and help it meet its future needs. It is never too early to plan!
The most important step in business succession planning is determining what you plan to accomplish through the business transition. This may seem straightforward at first, but understanding your goals and motivations will help determine why you want to sell your business and what this actually means.
Another important question to answer in the early stages of a business succession is to determine what is and isn’t important to you. This is a very important question to answer as it allows further insight into your plan and allows your business succession to not only achieve your goals but also help you to understand the underlying motivations for your business sale.
2. Identify Who is a Good Fit to Purchase your Business
It is important to identify the type of buyer that best suits your business succession goals. There are many types of buyers that can provide different options as part of business succession planning. Employees, financial buyers, competitors and management are all potential buyers who could help you achieve your goals. It is very important to start business transition planning far in advance – a short time frame will limit your options for finding the ideal buyer for your business.
Learn more about our Business Succession Planning services. Click here.
3. Determine the Optimal Time for Sale
It is extremely important to identify market indicators and trends in valuation in business succession planning. Identifying these trends and indicators will help you determine the optimal time for selling your business. If the trends show a negative outlook, it may be wise to accelerate or extend the succession of your business to capitalise on the optimal return. Identifying trends in the market may also help your business achieve a much higher purchase price than selling immediately in a down turning market.
4. Strategise the Implementation of your Plan
Determining how to put your insights into action is extremely important in business succession planning. Hiring a team of advisors will help you identify any risks and maximise your potential value and returns. Lawyers, accountants, tax professionals and investment bankers can help advise your business succession in the most successful way. This team of advisors can help with any legal or tax-related issues, ensuring your business succession goes as smoothly as possible. The team at Advivo for example, can help you fulfill the need for all these advisors.
5. Other Aspects To Consider
There is a lot to consider in the transition process. To give you some guidance, some of the services provided are listed below:
- Valuation
- Presentation for Sale
- Due Diligence Package or Investigations
- Risk Analysis
- Financial Modelling
- Strategy
- Timing for any Transaction
- Developing and implementing a Business Succession Plan
- Business and Asset Valuation – Assisting with deregistration of redundant entities
- Restructuring to achieve optimal taxation concessions in business succession
- Ensuring the Business Owners have a clear and fulfilling Retirement Plan
Some other tips in ensuring effective business succession planning include; allowing your business to find the right inclusions and ensuring the maximum return from the sale. A well-strategised plan will allow for a smooth transition if any unforeseen circumstances occur, such as sudden life changes. It is also important to have an understanding of any implications that come with deal structures and potential taxes and to calculate how much money you will need from the sale of your business.
If you own a business and are considering a transition to a family member or a sale to a third party, think about all the areas that are critical for the success of your business. Now think about your team. Can they take over? If not, you know where you need to focus. Spend your time and resources here rather than the mechanics of the transition – leave these to us. Once your team is ready to take over, then shift your focus to the deal.
Some other tips in ensuring effective business succession planning include starting your planning well in advance, allowing your business to find the right inclusions and ensuring the maximum return from the sale. A well planned succession plan will allow for a smooth transition if any unforeseen circumstances occur, such as sudden life changes. A major illness, for instance, can mean you need to exit your business sooner than expected and planning in advance will allow for breathing room and ensure you still achieve maximum value from your exit. It is also important to have an understanding of any implications that come with deal structures and potential taxes and to calculate how much money you will need from the sale of your business.
If you need assistance or have enquiries about succession planning, please don’t hesitate to get in touch with us today.
