Succession planning: 11 vital tips

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Succession planning is becoming the key to a successful, financially-secure and worry-free transition to retirment. However, as Gunilla Miranda reportsa succession plan can't be produced overnight.

“If you have not made any preparation, expect the process to take two years. It takes time to systemise and document the business. It is, of course, possible to do it quicker, but plan for two years and you will not be disappointed,” said DFK Australia New Zealand partner Robert Shelton.

If you have no plan at all, sit down with your board or partner and answer the following question: Is a family member taking over your business, or are you selling it outside the family sphere?

The sale process is, of course, different if it is through the owner’s choice, rather than out of necessity – such as a downturn in health, disability or death. If selling to an outsider, start with the following questions: 

  • What are you selling? Shares? Assets?
  • If selling assets, what assets are you selling/transferring and keeping? Are you selling intellectual property? Are they transferable? Know-how?
  • Timeframe: when do you want to exit?
  • Write a one-page brief overview including history, milestones and strong points. It is important that you don’t give away any trade secrets here. Organise a confidentiality agreement before revealing any secrets.
  • The most important question: Who is the potential buyer? In small business, for example, 75-80% of businesses are sold to someone the owner already knows, such as a supplier or client. Rarely does someone walk in from the street to buy.

When you know where the buyer is coming from, it’s time to think about price.


There are many things that can go wrong, such as the buyer not being able to obtain finance, so it’s important to be realistic about the timeframe and the price, said Shelton. He offered the following pointers: 

  1. Start early.
  2. Be realistic about the timeframe and price.
  3. Know what you are selling (and what are you not selling).
  4. Be open to alternative sale processes (e.g. I want your assets and your staff; I want your clients but not your equipment; I can only pay two-thirds; vendor finance).
  5. Know the income tax, GST, CGT, stamp duty and other tax issues surrounding the sale.
  6. Analyse the cash flow and debt obligations around the sale.
  7. Review your intellectual property asset and intangible liability.
  8. Inform your team appropriately, especially senior members.
  9. What happens after the sale? Will there be a restrictive covenant for the next five years, for example, or do you need to work again within six months?
  10. What are you going to do after the sale? You are used to a busy lifestyle. What are your plans?
  11. Above all, get advice: talk to your accountant early and continuously.

Whoever is going to take on the reins Graeme Bellach, partner of CIB in Parramatta, stated that “in succession planning, start early to groom the person who is taking over”.

Vital questions

If a family member is taking over, then a business owner should start to think about the following questions:

Family first: Do you want the business to remain in the family? If so:

  • Do you have any family members who are actively involved in the business?
  • Are any family members currently involved in the decision making of the business? Do family members have the necessary skills?
  • What is the impact on non-active family members?
  • What problems will this cause the family (e.g. disputes, etc.)?

Senior personnel:

  • Do not forget about senior people in the business and their effect on the business’ success.
  • Do they have an interest in owning part of the business?
  • Do they have the capacity to purchase part of the business?
  • Would they be able to work with the family members that remain in the business? 

Have you consulted with other owners who have been through a business succession and/or professionals with experience in this area (e.g. an accountant)?

Start to develop a picture of what the future business would look like without you in it:

  • Can existing staff take up your role and what training is required?
  • Can existing staff take up roles of people promoted by the transition and what training is required?
  • Will the business still be in harmony in this future outlook?
  • What weaknesses or problems do you see? 

Create a transition plan to achieve the succession:

  • Your replacement (successor(s)):
    1. Help your successor build a profile in the business, which shows credibility to staff, customers, and your family (after all they are taking over the family business).
    2. How will you inform/introduce your successor to your customers and suppliers?
    3. How will the successor(s) purchase your business?
  • Establish a timeframe for completion.
  • Document the plan.
  • Advise stakeholders of the plan.
  • Communicate regularly to stakeholders.

What is your contingency plan if things do not go according to plan? 

“It always come down to planning, a good dialogue with everyone involved and having a realistic timeframe,” said Bellach.

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