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Succession Planning – Building Your Business Legacy

As a hardworking business owner, you understand that success doesn’t come easily – it’s earned through hard work, dedication, and relentless effort. So, when it’s time to step back from your business, how do you know it is in a position to continue to thrive? That’s where succession planning comes in…

Succession Planning – What’s the Point?

A robust business succession plan that looks toward the future is as crucial as the strategies you employ in running your business right now. Without it, your hard-earned legacy can be left vulnerable when it’s your time to move on. Succession planning isn’t just about ensuring you can exit your business smoothly; it’s about protecting its continuity and value, ensuring that the people and community it supports can continue thriving. Succession can mean different things depending on your business’s size and type, but it generally involves transitioning ownership—be it to family members, employees, or external buyers. Sometimes, the need to exit a business arises unexpectedly due to health issues or unforeseen circumstances, making a well-thought-out succession plan not just beneficial, but essential.

How to Approach Succession Planning

While there are no one-size-fits-all solutions for succession planning (like many things in business for that matter), there are some key considerations that are reasonably universal:

  • Start Early: Begin planning well ahead of potential exit to give yourself the time to refine and execute the plan effectively. Given the role of a succession plan should something happen to you unexpectedly, it is important to get ahead of your planning as much as possible.
  • Define Your Succession Goals: Determine what you ultimately want from the succession. Is it maximum financial return, continuity for your staff, preservation of your company’s values, or a combination of these? Your goals will guide your planning and succession strategy.
  • Choose the Right Successor: Identifying a successor who shares your business acumen, values, and has the capability to take your business forward is crucial. This could be a family member, a key employee, or an external party.
  • Valuation and Maximising Sale Price: Understand the true value of your business. Professional valuation is key in determining your company’s worth and is crucial in negotiations with potential buyers or successors.
  • Legal and Financial Considerations: Engage with legal and financial experts to ensure all aspects such as transfer of ownership, tax implications, and funding for succession are meticulously planned.
  • Develop a Training and Transition Plan: Ensure a smooth transition by planning the training of the new owner or management. This includes passing on critical knowledge about business operations and key relationships.

Additional Succession Planning Considerations

As is often the case in business, there are a few legal and financial considerations that should be taken into account when planning a succession strategy:

  • Tax Implications: Minimising potential tax liabilities is critical. Considerations like capital gains tax, stamp duty, and potential estate taxes should be addressed within the succession plan.
  • Economic Timing: Exiting your business during a high in the economic cycle can significantly enhance the financial return on your business. Similarly, avoiding times where the market for your business is low ,it may be advisable to hold fire on a sale until things pick up again.
  • Insurance & Risk Management: Proper planning includes setting up insurances to cover liabilities and protect the business during the transition phase.
  • Legal Agreements: Ensuring all legal aspects are covered, including the drafting of sale or transfer agreements that protect your interests and those of the successor.

Engage a Professional

At McKinley Plowman, our business development specialists can create tailored succession plans that align with your business objectives and personal goals. Our comprehensive approach considers all facets of succession from maximising your sale price, optimising timing, and minimising tax, to finalising sale agreements and securing insurances. What’s more, our extensive network of professionals includes business brokers, who can assist in finding a buyer as required.

We not only devise the plan but also support its execution, giving you the much-needed peace of mind that your business’s future is secure. If you’re ready to develop a succession plan for your business, reach out to the team today on 08 9325 2411 (Perth), 08 9301 2200 (Joondalup), or contact us via our website.

written by:

Since entering the accounting industry over a decade ago, Levi has worked in senior positions alongside clients of all different sizes and industries, and joined McKinley Plowman in 2022. He combines his invaluable experience with his Chartered Accountant (CA) and Chartered Tax Adviser (CTA) qualifications, and delivers outstanding results for MP+ clients. At MP+, Levi works with clients to start, grow, and improve their business, and enjoys developing sounds tax and business development strategies to help them reach their goals.

Levi has a particular knack for optimising tax results, equipping clients with effective business structures, and delivering thorough forecasting to facilitate business growth. He loves seeing clients achieve their growth objectives and obtaining optimal tax results.

When he’s not in the office working hard for clients, you’ll find Levi spending time with his young family, and playing & watching soccer and AFL.

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