| With the average business owner aged between 50 and 59, most of whom are planning to retire within ten years, far too few have any idea of how they will exit. According to the Family Business Australia, Deakin, KPMG study 2006, 67 percent of business owners do not have a succession plan.
Business advisers may focus exclusively on the tax and legal aspects of transfer strategies, paying scant attention to the underlying emotional and psychological issues that exist in a family business. Addressing those issues first, can defuse family conflicts and ensure a smoother transition.
Experience tells us that when a family finds itself in trouble, the members rarely look to themselves to find a remedy.
Many would agree that the most desirable outcome would be for the business to pass to the next generation. But this is not always possible; maybe there is no family member who is ready, willing and able. This means the owner will need to look at other options, such as a management buy-out or sale.
Exiting a business is not a question of `if’, but `when’, say family business advisers, Harry Kras and Lucio Dana. “Transferring the business to successors is about creating a shared vision and working co-operatively during the transition period to achieve results that meet the expectations of all parties.
“The backbone of any successful succession is a good plan. The document is the culmination of a process, and acts as a guide to managing all the issues that are likely to surface.
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It will deal with;
the process of choosing a successor
the personal development of the successor
the evolving leadership roles of the incumbent and successor, including job descriptions for both at various stages during the process
ensuring a meaningful and secure retirement for the current leader
communicating the succession decisions to the family, the company and the community
considering future family participation in the business
organizational succession, covering evolution of top management and the board, career paths for key management
future family participation in the business
Once complete, the plan should be reviewed annually to ensure that it matches changing circumstances.
FBA’s tips for a management buy-out or sale option are;
Have an exit plan – if you stay, you are no longer the boss – so what is your role? Can you contribute, how will you adapt to this altered role?
Be aware of what the new owners/share holders want; cash, shares, jobs
Be prepared, whether it’s a sale a management buy-out or succession;plan to sell from day one. It is sometimes much easier getting into a business, than getting out.
Keep you books clean, avoid litigation and contingent liabilities as they can scare off buyers
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