Succession Planning - An Exit Strategy For Selling Your Business
One of the most crucial decisions in the life of a business is deciding how you will exit the business - will you:
- Close the business down and sell the assets
- Sell to a family member
- Sell to an employee
- Sell to an outside party?
Plan for your retirement and the sale of your business
Succession planning covers the key steps to prepare the business for that moment.
Developing and implementing a well-designed plan is essential to the long term success of the business you've created. The most important thing is to get your house in order:
- Put systems and processes in place so the business isn't reliant on the owner and can run as a standalone entity.
- Maximise your profit. Some of those tax driven decisions reduce your profit but also reduce your potential sale price.
People want to buy businesses that work, not businesses that are run by people that work and work and work. Succession planning is an on-going, ever improving process and is just as much about working ON your business as planning for the future.
You will get a better outcome if you prepare your business for sale
when you're fit and active. If you do that, whether you end up selling
it or not, you've got a business that is running well.
The most important thing when you want to maximise the value of the
business is to have choices. Waiting till you've have had enough or
can't physically work in the business removes those choices and lowers
the value of your business.
Due diligence is about ensuring that a buyer is fully informed and that there will be no future unpleasant surprises. It enables the buyer to rely on his or her own investigations, information gathered and judgment about whether or not the business is a sound investment. The business records need to be sufficient for the purposes of due diligence by a prospective buyer, trustee or extended family. We can guide you through the due diligence process.
The Succession Plan
Succession planning should start up to 5 years before the business is sold. Some of the issues to consider are:
- Review the business structure and remove non-business assets, expenditure and debt.
- Document your systems and procedures
- Identify and register your company's intellectual property
- Prepare and implement employment policies
- Prepare a strategic plan
- Identify and document all business relationships
- Have the business valued to obtain a realistic expectation of its current value and future possible value
- Develop strategies for profitability, growth, systems development, staffing and structure.
- Involve your trusted advisors such as accountant, lawyer, banker and business broker
- Prepare an information memorandum about your business to give to prospective purchasers.