18 October 2021
Have you ever dreamed about one day stepping away from your business knowing that it’s in good hands, you are financially secure and, most importantly, you and your family are happy and fulfilled? Probably. But have you ever thought about how you will actually make that happen? That requires succession planning.
Des and Paula Chapman from Rocky Ponds Produce have been clients of Findex for over 40 years. As one of Australia’s most innovative and successful growers of fruit and vegetables, we’ve helped Des and Paula over the past three years, develop a succession planning strategy that will help enable them to hand over the business to their son, Evan.
While transitioning a business to a family member is a common succession planning strategy, it’s certainly not the only one. So, what is the key to unlocking the ‘success’ in succession planning?
Well, there is no magic wand and it’s certainly not a one size fits all approach. But there are some things you need to think about and that you can do to set yourself up for a positive outcome.
A lot of business owners will already have one of these basic strategies buried in the back of their mind. So, let’s pluck it out from the depths of your subconscious and ask yourself the following questions to get your plan moving.
Strategy 1: Transition the business to family members
- Do you know what the business is worth or have an agreed method for valuing it?
- Does your family have the desire, skills and knowledge to continue to run the business successfully?
- Do they have the financial resources or access to funding to pay you for the business? If not, are you able to accumulate enough wealth outside the business to allow you to vendor finance or gift the business to your family and still live comfortably?
- If you gift the business, have you thought about all of your children and your eventual estate planning?
Strategy 2: Transition the business to existing employees
Consider all the points above but without the potentially messy family stuff. Additionally:
- Are you going to sell the entire business all at once or gradually transfer ownership?
- If you are doing it gradually do you have a shareholders’ agreement that sets out the terms of your ownership relationship with your new partners?
Strategy 3: Sale of business to external party
- Can your business run without you?
- Are you prepared to work in the business for a “hand-over” period?
- Have you discussed the sale with your employees and family?
- Are there suitable buyers in the market for your business?
- Do you know what your business is really worth?
No matter which way you are leaning, the key to success is making the time to think and talk about whether your strategy is the right one for you and your family. Give yourself enough time to implement it successfully and be flexible enough to change strategies should your business or family circumstances change.
Des and Paula Chapman from Rocky Ponds are a great example of this. Their main concern has always been the happiness and well-being of their family and discussions around the future of the business and the family’s financial security have been at the top of most of our meeting agendas over the past five years or more. They have always sought our advice well in advance of making decisions and given themselves time to implement plans, strengthen their position and give themselves options.