Next-gen­er­a­tion plan cru­cial

Wanneroo Times - - Fit For Business - Emma Blake

START­ING a busi­ness is a mo­men­tous event in any small com­pany owner’s life.

What fol­lows is a long, con­sis­tent ef­fort to make the busi­ness a suc­cess and keep it that way.

But when it comes to de­cid­ing what to do with that com­pany when the founder has had enough, more thought and en­ergy is re­quired.

Small and medium-en­ter­prise own­ers say busi­ness plan­ning is their big­gest con­cern while suc­ces­sion plan­ning is their sec­ond big­gest worry, Pros­per­ity Ad­vis­ers’ 2016/17 SME Re­search Re­port found.

A busi­ness can be all-con­sum­ing men­tally, phys­i­cally and fi­nan­cially. An owner’s home and su­per are of­ten tied up in the com­pany’s cap­i­tal and if they want to re­alise that cap­i­tal they need to put a strat­egy in place very early, ac­cord­ing to Al­lan McKeown, co-founder and chief ex­ec­u­tive of busi­ness and ac­coun­tancy firm Pros­per­ity Ad­vis­ers.

“Many might have an idea (about suc­ces­sion) in the back of their mind but those that make a plan will in­cor­po­rate it as a part of due process and have a proper rig­or­ous think about it,” Mr McKeown said.

He said there were two as­pects to suc­ces­sion: man­age­rial suc­ces­sion where you re­cruit tal­ent into the busi­ness to grow it, or to even­tu­ally run it; and how to re­alise the cap­i­tal in­vested in the busi­ness so you can re­tire.

No mat­ter how small your op­er­a­tion, Mr McKeown ad­vised seek­ing ex­ter­nal ad­vice from an ex­pert or a trusted men­tor.

“Have a catch-up ev­ery three, six or even twelve months about how the busi­ness is go­ing and what your op­tions are,” he said.

It is also im­por­tant to have a solid un­der­stand­ing of ex­actly how much your busi­ness is worth and, if you are plan­ning to sell it, not to leave it too late.

“Peo­ple have an opaque view of what their busi­ness is worth. You might be forced into sell­ing it sooner than ex­pected due to ill­ness or fi­nan­cial mis­for­tune. That cre­ates pres­sure and you may have to sell at a value that’s less than you were hop­ing for,” Mr McKeown said.

“As early as pos­si­ble you need to start di­ver­si­fy­ing your in­vest­ment, which is hard when you are in­vest­ing ev­ery­thing into grow­ing a busi­ness. That might in­clude adding money to sav­ings, su­per or an in­vest­ment prop­erty.”

Fam­ily busi­ness ad­viser Philip Pryor agreed that plan­ning well ahead was key to an ef­fec­tive suc­ces­sion plan.

“In a fam­ily busi­ness you need to be think­ing at least 40 years ahead,” Pryor said.

If you do plan to pass the busi­ness on to the next gen­er­a­tion, or hire an ex­ter­nal chief ex­ec­u­tive to run it, you need to make sure the founder has a role un­der the new lead­er­ship.

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