Business is complicated – that’s a given. The entrepreneurial world is diverse, dynamic, interconnected and unpredictable as ever. Along the way, you will succeed and you will undoubtedly fail – maybe even multiple times at that. As you dance this precarious tight rope and learn what it takes to run an effective and prosperous business that meets not only your desires as the owner, but the goals of your employees, and the unique needs of your customers, this question will inevitably surface: what will happen to my business after I’m gone?
We recently shared research by Yale University, which confirmed that the average lifespan of a business is only 15 years, which is pittance, really – especially when you’ve invested your time, energy and precious funds into something you believe in. Without a succession plan in place (otherwise known as your ‘exit strategy’) for the day you leave your business for whatever reason fate decides, your business will likely fall into the same 15-year loop whole too.
But what if your business could out-do the statistics and not only survive, but thrive into the future? What if your business was equipped for the long haul, even after you’re gone? You can build a business to withstand, well, just about anything – if you take the right steps now.
The viability, longevity and endurance of your business ultimately comes back to creating a succession plan. Depending on the size of your business and the type of service you offer, your succession plan will vary. Business.gov.au has a template succession plan and below we have included our tips to help your business last not just 15 years, but a hundred years down the track.
Our biggest tip before you dive into the details – make sure your succession plan is achievable. Set a realistic timeline of when each measure will be started and finished, as well measurable milestones along the way so you can follow through.
Here are some of the most important things to consider:
The nitty gritty
You’ll need to make sure you’ve captured the details of your business, such as registration name, structure type, the owner’s name and contact information, the successor’s name and contact details, the type of succession you have planned, the timeline, and any restrictions you want to implement as part of the succession, as well as what insurance you have in place in case of disability, injury or death. You’ll also need to know the current value of your business, any retirement payments required (and the terms of any pay-out agreement if you have one), and the sales details if you decide to sell your business as part of your succession plan. You also want to detail the taxes payable in the event of a transfer or sale.
Going firm on the structure
This is where you briefly include how you want the organisation of your business to look like when you leave. Take into consideration your current business model and changes you want made going forward, which might impact everything from staff, branding and location, for example.
Here, you’ll want to consider all the staff and roles in your business and whether they will continue or change with the succession. Make a list of each job role, if there is a current staff member for the position, the skills required to fulfil the role and any training required.
Retention of skills
Continued learning, education and training are an essential part of any business and shouldn’t be forgotten in your succession planning. Detail here the skills training your staff currently receive in their respective positions, and any gaps you envision in the future when the succession takes place. Also, it might be worth considering what internal processes should be implemented, so that the skills of staff are up-to-date and beneficial for the business.
List the business registrations you’ll need to transfer or change, such as the business name, Australian Business Number (ABN), Australian Company Number (ACN), Goods and Services Tax (GST), intellectual property, domain name, local licenses and permits. Also, include here if you will change the business structure. For example, from sole trader to a partnership, as well as any other transfers like memberships, leases and subscriptions.
Additional legal considerations
Indicate here whether there is a legal document that dictates the terms of the succession and describe the terms, including whether there is a buy-sell agreement or a partnership arrangement. List any contracts that need to be drawn up or modified in the event of the succession and attach relevant copies to your plan.
The contingency plan
Every succession plan needs a contingency in place. Think about what could go wrong while your succession plan is implemented and the potential impact to your business, then detail your contingency in the event it does it occur.