Family businesses are not uncommon in Australia. In fact, they account for 70% of all businesses in Australia and employ around half of the country’s workforce (Australian Small Business and Family Enterprise Ombudsman, 2020).
With such a large percentage of Australian businesses being owned and operated by families, it is no surprise that we hear a lot of stories from clients about complications that have arisen when it is time for the owner/operator to move on from the business. The reality is some discussions about the future of a family business can lead to unwanted tension and, in some cases, endanger the future of the business.
To ensure the success and longevity of a family business, it is vital that business owners take a proactive approach to succession planning.
What is a succession plan?
A succession plan is a summary of what the future of your business will look like following the current owners departure from the business. Properly undertaken, a succession plan can contribute to a smooth and effective transition of the business, be it to the next generation of the family or someone external.
Here are 4 considerations to remember when making your succession plan:
1 – Vision
When considering your succession plan, you will want to ensure it aligns closely to the mission, ethos and values you have created and fostered in your business. Family businesses, often more so than others, are built around valuable qualities that are not only important to employees but to customers. By not proactively taking these into consideration when building out your succession plan, you risk these being lost during the transition which can ultimately lead to the business suffering.
2 – Leadership
Choosing who will be the successor or successors of the business when the owner ultimately decides to transition out is one of the most important decisions of a succession plan. It may be the owner wants the business to continue in the family or look for someone external to take over. Regardless of this choice, the creation of a succession plan which determines who is to transition into leadership is paramount to limiting disruption to the business.
3 – Development
The benefit of having a succession plan prior to the necessary transition allows the future leaders the best chance of getting across everything they need to to effectively run the business. Succession plans usually include strategies for increasing the knowledge of incoming leaders and help build their prospects for a successful transition.
4 – Timing
When planning the transition of ownership, it is important to consider the timing in which everything will occur. Succession plans allow you to determine whether it will occur over an extended period of time, on a certain date or upon a specific life event. If the owner plans to enable the succession prior to their departure, the plan can include an implementation timeline and training plans for successes over that time.
Please note this article has not addressed taxation, however this is a vital consideration when handing on a business and we recommend seeking advice in relation to this. If you own and operate a family business and would like to discuss building or reviewing your succession plan, contact our team at Brandon and Gullo today for a free consultation.
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