This question is often the first we will ask our clients as knowing the end point is a one of the most important points to know as part of the overall business planning process.
At a presentation we attended on Business Succession some statistics that were presented staggered me as I’m sure they will yourself. The stats around SME’s are:
- Average age of owners is 57 years of age
- 60% of business owners have run their business for in excess of 20 years
- 50% of business owners see their business funding their retirement
- Only 38% of businesses have a succession strategy or succession plan
- Only 12% of businesses have adequate business insurance
- 33% passed to Generation 2
- 16% passed to Generation 3Of those business that are passed to the next generation, particularly within family’s the following generational statistics apply.
Business succession is one of the most important areas to get right within your business as for many people this will be the main source of funding for their retirement.
Business succession should never be a short term consideration as it can take years to build up a business ready for sale or for passing to the next generation.
To assist here are some steps to understand as part of your succession strategy:
- What is my exit point – 1year, 3 years, 5 years, 10 years.
- Document business processes and procedures – recording this information provides value in the form of Intellectual Property for your business.
- Who is a likely successor for your business? Family, Management, Employees, Competitors
- What is your retirement requirements? How much money do you need to retire?
- Have you reviewed your corporate structure to determine that this is the most appropriate for your current and future requirements
- Speak to your business advisor about your succession and exit strategy as early as possible.
If you have any further pointers or tips on how to best manage a succession plan please leave a comment below.
