BUSINESS INFORMATION
Succession planning
Having a succession or exit plan in place ensures a seamless transition when you decide to step away from your business.
Whether you plan to sell, retire, or pursue other ventures, a well-prepared strategy can make the process smoother.
Starting succession planning well in advance is advisable, as it prepares you for unforeseen events like illness or death. Without a plan, the future of your business could be uncertain. Early preparation also allows you to maximize your business’s value.
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Developing a plan
Ensure your succession plan is practical and attainable. Consulting with a business advisor, accountant, or lawyer can provide valuable insights. While there are no fixed rules for what to include, consider addressing the following:
- Successor details: Family member, business partner, or external party.
- Type of succession: Partial or complete transfer.
- Timeline: Clear timeframe for the transition.
- Key personnel changes: Strategies to retain essential skills.
- Restrictions: Any limitations on the transfer.
- Legal aspects: Buy-sell agreements, wills, and other legal documents.
- Risk management: Mitigating potential risks.
- Communication strategy: How the transition will be communicated.
- Financial considerations: Retirement income, sale price, and tax implications.
You can download a succession plan template from Business.gov.au.
Keeping the business in the family
If you intend to pass your business to a family member, consider the legal obligations and potential impacts on family dynamics. Involving a lawyer or business advisor in family discussions can help prevent disputes over inheritance, ownership, or management.
Family Business Australia provides advice for family-run businesses.
Buy-sell agreement
A buy-sell agreement is a legally binding document between business partners or co-owners that outlines the steps to be taken if an owner departs due to retirement, death, disability, or other reasons. Key elements include:
- Eligible buyers: Who can purchase the departing owner’s share.
- Triggering circumstances: Events that allow the sale of shares.
- Valuation: The price to be paid for the shares.
Other options
Alternative exit strategies include:
- Selling the business.
- Closing the business.
- Hiring external management to oversee operations.
Your accountant can help determine the most suitable option for your situation.
Review your plan
Once your succession plan is in place, review it regularly, especially when circumstances change, to ensure it remains relevant and effective.
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