08 March 2022
Who will step up when you step down?
Succession planning has been identified as the #1 non-financial risk facing small and medium-sized businesses, according to a recent report.
Bstar’s 2020/21 SME Research Report reveals only 25% of Australian SMEs have succession arrangements in place ready for the day their owner steps down and a new leader steps up. Also alarming is the fact that 70% of business owners who took part in the research reported medium to high levels of concern when it came to identifying a successor.
When the researchers delved deeper, they discovered only 7% of respondents had comprehensive, up-to-date management and ownership succession plans in place. Concerns about funding retirement, getting the business in optimum shape to sell and developing an exit strategy were all closely aligned with concerns about succession planning.
If the pandemic has taught us anything, it’s that we never know what’s round the corner. Talking to your Business Advisor about succession planning is not only a practical exercise, but it can also bring welcome peace of mind.
What is succession planning?
Unlike estate planning, which is about planning for what happens to everything when you die, succession planning is about making sure you have a plan for the future of your business when you decide to step down. Most business owners will have retirement in their sights at some point. It therefore makes sense to have a plan in place so the business can be sold for maximum return or passed to the next generation, for example.
Getting ready to appoint a permanent successor might involve actively and strategically planning for the future and ensuring your business is ready for change. Professional development initiatives and recruiting with growth, inclusion, diversity and new opportunities in mind might also become part of the strategy.
So, why do so many SMEs shy away from succession planning?
Generational shifts in the workforce have arguably made it more difficult to appoint a natural successor. Today it’s far less likely a business will pass from generation to generation. Future-proofing your legacy and planning for the day you relinquish the reins also has the potential to be both complicated and emotionally challenging.
While understandable, these aren’t reasons to let succession planning slide. It’s too important not to get it right. Planning for the future isn’t easy, but there is help at hand as you ask yourself some important questions:
- Who will step in to look after my business when I decide I want to step down?
- How would I like my business assets to be managed should something happen to me?
- How can I mitigate the personal risks to my business?
- How can I secure a financial future for the next generation?
How your Business Advisor can help
From identifying new leaders for your business, to avoiding unnecessary tax liabilities, your Business Advisor, along with your estate planning lawyer, can provide the guidance you need to make the important decisions. Your Business Advisor can also take you through scenario planning specific to your business, modelling likely scenarios and identifying what its new leaders might look like.
And remember, your Business Advisor is an independent sounding board and can help manage emotions when family-run entities and family legacies are involved. They’re also there to make sure the process is smooth and seamless when the time comes for you to step away from your business and enjoy your well-earned retirement.