How to develop a succession plan
A common misconception is that the definition of a succession plan is a way for a business owner to structure the handover of their business to someone within the family.
While this is one reality of a succession plan, it can also extend to many facets of a business, whether it be handing ownership to existing employee/s, outside investors, friends, family, a buyer or even just handling the succession of management/ownership in the case of illness.
Because of this diversity of options, a succession plan is often something best done with the help of a professional. As a business owner, you will already have access to the services of an accountant and a solicitor, and they can easily and quickly help you put together the financial and legal aspects of the succession plan. A business coach or HR planner can help you develop the strategy behind how you will handover not just the business but the skills needed to run the business.
What does a succession plan look like?
Part 1: Business information
In the first section of a succession plan, you should aim to outline all the details of the business and those of the business owner. These include:
- Business name, ABN, CAN, and address
- Business owner details
- Date of this form/plan
- Contents of the plan (for easy use)
- Introduction to the plan (a general outline)
Part 2: Succession details
This is the bulk of the plan and is used to help guide the process of transition, solidifying any negotiations between business owner and buyer (or family members).
- The business structure in its current form (ownership)
- The form succession is taking (is it a partial succession where the owner maintains some financial or advisory control? Is it an incremental process?)
- Successor details
- Timeframe of the transfer
- Organisation structure (who does what) and what job appointments will need to be filled or training provided (providing details on the time and process)
Part 3: Finances
- Business evaluation
- Any financial arrangement regarding the outgoing owner (if they are staying on in an advisory role, for instance)
- Details of the sale of the business
- Tax details that relate to the sale
- All supporting documentation.