Most family businesses start from something small. After years, sometimes decades, of hard work these businesses can grow to be highly successful. Eventually the original owners reach a point when they no longer want to, or are able to, manage the business. For many people this can be very daunting. It is only natural that you want to see your business have a life after you.
Whether you intend to hand the reins over to the next generation, to someone from within the business, or sell to another person or company, there are many things to consider:
- Who will run the business when you are no longer there?
- Does the next generation share your passion for the business? Do they have the skills to run the business?
- If family is going to take over, can they afford to ‘pay’ you what the business is worth?
- Will you receive a lump sum when you exit, or will you be paid over time?
- What will it mean for other family members not involved in the business?
- How can you maximise the ‘value’ of the business ready for sale?
- What are the tax and legal implications of selling?
Start planning early
The issues around business succession planning are varied and complex. It takes time to work through and resolve these issues. Planning needs to commence a number years out from when you intended to exit
Prepare the business for life without you
Whether the next generation will take over or the business will be sold, the managers and employees left behind need to have the skills and knowledge to run the business. It is important that personnel and skill gaps are identified early so that training and/or recruitment can occur
Identify potential successors
Identifying and critically evaluating potential successors is essential. It may be important to look beyond the obvious at different alternatives. The right successor will result in a good financial outcome for you and longevity for your business
Be realistic about your valuation
Business valuations are subjective, especially for those who have worked in the business all their life. Negotiating a business sale or transition can create rifts between families or heated arguments across the negotiation table. Obtaining an independent valuation of your business will assist in more amicable discussions
Know the tax implications
For many the sale or transition of their business will represent the most significant part of their retirement funding. Maximising your after tax proceeds will be a key goal. It is critical to get advice on both your exit strategies and structuring of your retirement assets
BLG Business Advisers have been involved in all types of business succession situations and can assist small, medium and large business owners to make a successful transition. From business valuations and tax planning strategies, to general business, retirement and estate planning advice.
Contact us online or call (02) 4229 2211 to arrange an appointment with one of our experienced advisers.