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.

A man mentors a young worker

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

  1. Business evaluation
  2. Any financial arrangement regarding the outgoing owner (if they are staying on in an advisory role, for instance)
  3. Details of the sale of the business
  4. Tax details that relate to the sale
  5. All supporting documentation.

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