It’s estimated that there are around 1.8 million family businesses and 2.6 million small businesses operating in Australia. Many of these have substantial value yet relatively few family or small businesses have a proper succession plan in place. 

Succession is serious business. I know, as I’ll be retiring in five weeks and selling my share of our practice to one of our up-and-coming superstars.

I announced my retirement internally around 4 years ago and we’ve been working to a solid plan ever since. These are my 10 steps for a successful succession.

Step 1 – start early. Make the decision well ahead of time so that you can properly consider the impact on owners, team members and customers.

Step 2 – document the process. This can be a list of dot points, but you should consider everything that needs doing with timelines – announcements, allaying fears, PR, new ownership, financing, transacting, settlement etc.

Step 3 – identify new owners. At FAJ we always promote from within. This provides incentive and purpose for our most ambitious team members. Having an established and well understood formula and method of valuation is essential, as is clarity of the role and expectations of the new owner. And remember to choose carefully. Going into business with a partner is a bit like a marriage – it can seem like a good idea at the time but is very difficult to undo.

Step 4 – document the proposal. Both exiting and new business owners want certainty about what is happening. You’ll probably need a lawyer for this bit.

Step 5 – announce the changes. Team members and customers should be informed well in advance to allay any fears that they will be impacted negatively. Change is usually a good thing with a whole range of positive impacts. 

Step 6 – arrange finance. Consider the options; will it (and can it) be funded by bank finance, or perhaps a staged sale or vendor finance is more suitable.

Step 7 – train and mentor the new owner. Regardless of their skills and experience, they will not know exactly what success looks like in your business.

Step 8 – transition and handover. This should commence well ahead of the changeover date. Customers and team members need the security, confidence and comfort of seeing the existing owner carefully hand over their business to the new owner.

Step 9 – changeover and settlement. This should have been documented in advance and should just be a formality.

Step 10 – have a big party. You won’t find that in a textbook, but since it’s me that’s retiring…

 With the right planning, succession isn’t just possible – it’s the legacy of a business well done.

by MARK DOUGLAS
FCPA
Managing Partner of Francis A Jones
www.faj.com.au