Succession Planning

The importance of Succession Planning

If you run a business in Australia it’s really important that you give some serious thought to who will run and manage that business when you retire or something unforeseen happens to you (succession plan).

Family businesses by nature may also have several other issues that work against the successful continuation of the business. Fortunately, with focus and planning, most of these can be easily overcome by paying attention to the details.

Key issues may and could include the following:

Generational transition. It is estimated that only a third of all family businesses successfully make the transition to the next generation.

Alignment of family interests. Alignment of interests between the current owners and others in the family becomes more of an issue when the Founders take more of a back seat in the day to day running,

Balancing of financial returns. When the retiring generation looks to the value of their interest, they sometimes tend to look to a balance sheet number. In fact, the true value of a business should probably be based on an earnings capitalization model, a concept unfamiliar to many smaller family companies.

Interfamily disputes. Families can be quite complicated at times especially when working together or taking control over the family business. It could be that the interest of one family member may not be fully aligned with another family member. In situations like that, it can become even more difficult where there is a divorce of a family owner, or a death and the surviving spouse has major voting rights but that person is not involved in the day to day running of the business. These issues need to be clearly documented ahead of any unforeseen circumstances.

Estate and Inheritance issues. These include taxes and probate delays upon the death of a family owner.

WealthVisory along with our professional services Partners can help you identify some of the issues that you may need to address.

Call us today for a no obligation chat.