If you’re getting ready to take a step back from your business because you’re nearing retirement, or are thinking about selling up and moving on, it might be time to develop a succession plan for your company.
Although you may not be ready to exit your business in the short term, there’s no harm in being prepared for such an event. It’s beneficial to have a succession plan drawn up to ensure that your business affairs will be taken care of if something unexpected should happen.
There are a number of benefits in having a succession plan in place, it may help to :
Before developing a succession plan you should:
Once you’ve done your research, and have decided on your financial goals and timelines, it’s a good idea to get professional advice.
By seeking impartial professional advice you’ll be able to take the emotion out of the process, and put together a realistic and achievable plan, that’s fair to all parties involved.
A succession plan lays out details about who you’ll pass your business on to and how. This is essential if you’re thinking of selling, you’re approaching retirement or you’re taking a step back in your role in your business. Even if you’re not planning a transfer in the short-term, a succession plan is a form of protection. It may include a formal buy/sell agreement and or specify estate planning in case of death.
There are many benefits to having a succession plan:
When it comes to setting up a succession plan, it’s about understanding what your business needs, and what would be in its best interests when you’ve exited the business; and then putting together a formal plan to document this.
If you’ve decided to sell your business, it pays to plan wisely and early. Here are some questions to consider.
Knowing the value of your business is key for both you and your future owner. This will help you understand how much you might make from the sale, and will provide any potential owners with detailed information on how your business has been performing. It helps to conduct your own research into the value of your assets and earnings, and how much a similar business might cost. For a detailed independent understanding of the value of your business, you may want to approach a valuer.
There are a variety of ways to find a suitable buyer for your business. Beyond listing your business with an agent, you may consider signaling your interest in selling the business to your employees, family members, competitors or other contacts. Or you may want to approach investors, business brokers or buy advertising space in a media outlet to advertise it yourself.
Whether you’re planning on using the profits from a sale for retirement or are looking to put it towards another start up, it’s always good to maximise the amount of money you end up with. As such, it’s ideal to sell when market conditions are healthy for your industry. It’s recommended you get help from a business consultant, accountant and solicitor to help identify the best time to sell, find buyers and work out how to structure the sale agreement.
If you are planning to sell your business to someone you know, or even if you are using a business broker to sell it, you’ll need your business to be in the best possible shape when it goes up for sale in order to get a good return on your investment. Putting in the effort to get everything sorted before you sell is a really good idea.
To find out more information on getting your business ready for sale visit business.govt.nz.