Do you have an exit strategy for your business? Whether you have recently purchased a business or you have been a proud business owner for many years, all business owners need to put careful consideration into an exit strategy. Who would take over your business if you became ill or impaired, or needed to sell, or planned to retire?
An exit strategy needs to be planned in advance, as often an exit can need to be enacted unexpectedly.
The best option is one where you have choice. If you know you will need to sell your business in order to retire, then selling when you still have the choice is always the best option to give you the best price. Knowing who you are going to sell to will also impact your decisions. For example, are you planning to sell the business to a family member, or a senior member of staff, to a competitor, or on the open market?
A good plan will assist your business to transition to the new owners with less effort. If this plan is developed early, is communicated to others and assistance is sought from accountants and lawyers, the business can be structured in a way that can meet future needs of yourself and others.
While developing this plan, it needs to include realistic goals and timeframes so that the business is able to meet these. If your plan is to sell this business to a family member or a loyal employee, have you given them the skills needed to run this business? If this is something you would like to consider, starting to train them to run the business early can be vital so they are confident enough to lead the business into a new era. If they do not have the necessary skills or are unable to run the business to your expectations, what is your plan?
A suitable succession plan should include but is not limited to the following:
- Business & succession details including what the plan is and how it is going to work.
- Proposed Organisational Structure
- Key Personnel review including listing all required staff and their positions and skills, plans to retain the skills within the business or training programs to ensure the staff have the skills needed to succeed in the business.
- Registration transfers requirements such as ABN, ACN, GST, PAYGW, intellectual property, domain name and local licences/permits.
- Legal Considerations including possible contracts, buy-sell agreements and wills being reviewed.
- Insurance policies and consideration to the policies which may be required with a different structure such as key man insurance.
- Succession timeframes and key dates
- Contingency/risk management
- The Finances including the current value of the business, retirement income/payment, sale details, buyout details and taxation.
- Supporting documentation
This plan should be reviewed regularly to ensure that the business is meeting these goals and to ensure any circumstances which may have changed are taken into consideration.
If you don't have an exit or succession plan in place, book a session with Director and Business Advisor Wayne Patten, who specialises in succession and exit planning.