Even If You’re Not Retiring Soon
If you’ve ever watched HBO’s ‘Succession', you’ll know what happens when there’s no clear plan for who takes over a business. Cue power struggles, drama and, potentially, chaos. While your business might not be a multi-billion-dollar media empire, the same principle applies – without a solid succession plan, things can start to unravel.
What is succession planning?
Succession planning is the process of deciding who will take over the leadership, ownership or both when you step back or out of the business – this may be in the context of retirement, a sale, illness or a well-earned break. It’s not just for big corporations, even small and medium-sized businesses need a plan to ensure continuity.
Why start now?
Many business owners put succession planning off, assuming it’s years away. But life doesn’t always follow your timetable. A plan made under pressure often leads to poor decisions, unnecessary stress and unexpected tax bills.
Three key reasons to start early:
- Preserve business value: A planned transition or exit keeps the business stable and attractive to buyers or future leaders. A rushed handover can disrupt operations, reduce profitability and scare off customers or suppliers.
- Protect relationships: Whether transferring control to family, staff or an external buyer, a clear plan and effective communication can help align expectations and avoid misunderstandings and resentment.
- Manage tax implications: Transferring shares, selling assets or restructuring ownership can trigger tax consequences. With time on your side, you can work with your accountant to plan a tax efficient exit and protect the wealth you’ve built.
What does a good succession plan cover?
- Clear goals: Do you want to sell, hand over to family or transition to management?
- Leadership development: Lining up the next generation of leaders and ensuring they have the skills and experience required takes time.
- Valuation and sale strategy: Understand what your business is worth and how you intend to structure the deal.
- Ownership transfer details: How shares, assets or control will be passed on.
- Contingency planning: Build in some flexibility and options, expect the unexpected.
Family Matters
Family businesses bring extra complexity. Emotions, expectations and differing visions for the future can frustrate even the best intentions. It’s worth having open conversations and engaging with your trusted advisor early. That way, decisions can be made that seek to align both business and family goals.
Your next steps
You don’t need to map out every detail immediately. Start with clarifying your goals and building a realistic timeline. Take control and make sure you decide what happens next.
Disclaimer – While all care has been taken, Johnston Associates Chartered Accountants Ltd and its staff accept no liability for the content of this article; always see your professional advisor before taking any action that you are unsure about.
JOHNSTON ASSOCIATES, Level 1, One Jervois Road, Ponsonby, T: 09 361 6701, www.johnstonassociates.co.nz
