Four reasons you need a business succession plan

As a small business owner, do you have a succession plan in place for your company? If the answer is “no”, you could be in trouble later down the track. Here are four reasons why it’s crucial to have a succession plan in place for your business. 

Consider this… 

1. A succession plan defines your options. 

If selling your business is your succession plan, you may need to think again. Many small business owners struggle to find an external party willing to purchase their company. This is especially true if you work in a saturated market, or your business isn’t doing so well come sale-time. Instead, you could look to a trusted family member or internal successor (such as a Manager) to take over your business when the time comes. 

2. Your successor needs to be prepared. 

Your successor will need time, sometimes up to five years, to learn how every aspect of the business works. This is especially true if they’ve never owned a business before, or have but are moving into completely new territory. For example, transitioning from owning a cafe to owning a plumbing business. Your successor needs to gain the expertise and skills they will need to effectively run the business, as well as ample time to establish relationships with customers, suppliers, and existing employees. 

3. Your business needs to be prepared. 

As well as your successor being ready, your business needs to be ready too. From a financial perspective, you need time to optimise the sale value of your business. This involves ensuring that your company has been profitable, and has solid, attractive growth prospects. 

Another important factor to consider is that the business needs to be able to operate without you in it. This seems obvious on paper, but it’s an enormous factor many people don’t consider, or aren’t even aware of. When your processes, sales, and employees wholly rely on you for day-to-day tasks and operations, the business is likely to fail once you sell it. Not sure if this describes your company or not? If you go on holiday and come back to find your business is a total train wreck, this is a good indicator that your business won’t do so well without you in it. 

If you’re unsure how to transition from a reliant leadership model to a “leaderless” structure, we strongly recommend the book The Starfish and the Spider: The Unstoppable Power of Leaderless Organizations. If reading really isn’t your thing, you can get personalised advice from an advisor instead. Or both! 

4. A succession plan is also an emergency contingency. 

Should the worst happen and you suddenly become seriously ill or die, a succession plan ensures the continued smooth running of normal day-to-day operations. If the business does need to be sold, you will have put the company in a better situation when it comes to the sale value. 

Having a succession plan in place now, can also reduce any conflicts or contesting of your Will following your death; giving both you and your family members peace of mind. 

What should you do next? 

Professional advice is critical when it comes to implementing a succession plan, given the complex nature of both the financial and legal requirements. Ascent Accountants provide small business advice Perth businesses can rely on. 

With the skills and expertise to assist their clients with the planning and implementation of a succession plan, Ascent Accountants can provide you and your family with security for the future. What more could you ask for? Talk to us today!