Articles

Succession Planning – Don’t Die In Your Business

January 31st, 2011

If you’re a business owner between the ages of 46 – 63 years old you’re a baby boomer and latest indications are that the population aged 65 years and over is expected to grow by about 100,000 in the next decade and another 200,000 in the 10 years following that.

So unless you want to die in your business, at some stage over the next few years it’s vital that you give some thought to succession planning and what’s going to happen to your business as you travel towards those golden years.

First of all what does succession planning mean?   Most would think that it’s having an exit strategy to sell the business outright (and it might be), but you may consider other options such as key members of the current staff becoming share-holders, joining with a new business partner, exiting from the business over the period of time or merging with another player in your industry.

There are a number of options and what may suit one may not suit the other, but regardless if you do nothing you will most likely miss the opportunity to extract the value that you’ve built up in your business over the years and this may mean that you might miss out on any dollars from a potential sell down or even loss of the business itself.

The first step in your succession plan may be to look at the next 10-20 years and decide where you want to fit into the overall operation. Look for areas where there are skill gaps, develop processes, systems and the people that means the business isn’t reliant solely on you – in effect manage the current risk better today.

Consider the external side of your business as well. There will be client and supplier relationships that will need to be maintained and a potential buyer or shareholder will want to be able to maintain existing relationships and business when they become involved.

Then when you make the decision to begin the process you will need to commit to it and accept the fact that you may not have the same amount of control that you once had, that the new owner or shareholders may want to do things differently from you and just as a parent has to watch a child leave home, you have to realsie that if you sell or bring in a partner, your baby will never be the same again.

When commenting on business planning, Business NZ chief executive Phil O’Reilly said ‘it confirms, once again, that the basics work. – budgeting, thinking ahead, building manager capability, having a plan and executing it. SMEs tend to think these things are complicated, but they don’t need to be’.

So keep the transition simple. Focus on the systems and processes that drive your business, be aware of the governance responsibilities that are involved if you bring on more share holders and directors, but most importantly start thinking about the issue today. Because if you don’t you may be one of those 300,000 baby boomers retiring in the next 20 years with nothing to show for all the hard work that you’ve done building your business and that just isn’t doing justice to your business or yourself.

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