In this edition of our Business Lifecycle Series, Simon DePaoli, Director and Business Advisor at Moore Australia (VIC) provides insights into the importance and benefits of succession planning for business owners and how your accountant can help.
WHAT IS SUCCESSION PLANNING
Succession planning is the process of identifying and developing future leaders within an organisation who will one-day take over the business when the current owner or senior leaders retire, move on for other opportunities or pass away.
Succession planning is an essential aspect of managing a business in Australia and assuring its future, particularly for small and medium-sized enterprises (SMEs) and family businesses.
BENEFITS OF SUCCESSION PLANNING
There are many advantages for both business owners and employees to having a formal succession plan in place, including:
Minimise tax liability
This is particularly important for family businesses that pass a business down from one generation to the next, which can result in large tax bills if not properly planned for.
Working with an accountant will ensure that you are taking advantage of all available tax breaks and incentives to minimise the tax burden on the new owners.
Furthermore, the Australian government offers a range of tax concessions for small business owners, such as the Small Business Capital Gains Tax Concessions, which can help reduce the tax burden on the sale of a business.
Ensure continuity and sustainability
By identifying and developing future leaders well in advance, you can ensure that your business is prepared to continue operating even if the current leaders are no longer able to do so.
This is a safeguard to protect the continuity and sustainability of a business, which is particularly important for SMEs, who often rely on a single owner or small group of leaders to drive the business's success.
Facilitate intergenerational planning
Intergenerational planning is a key aspect of succession planning for family businesses. This process involves not only transferring ownership of the business, but also ensuring that the values and traditions of the family are passed down to the next generation.
A family constitution, outlining the values, goals and expectations of the family, can be a valuable tool in this process, as it provides a clear guide for the new owners to follow in order to maintain the family's vision for the business. This type of planning can help to ensure that the business continues to operate in line with the family's values and goals, even after the ownership has changed hands.
Ensure a smooth exit strategy when selling the business
A well-planned exit strategy can help to maximise the value of the business and ensure a smooth transition for the buyer and seller. Working with tax and business advisors provides benefits such as, expertise in identifying potential buyers, negotiating terms and ensuring that the sale process goes as smoothly as possible.
Employee retention
Where a solid succession plan exists, it lets employees know there is opportunity for advancement and possible ownership. This can lead to more empowerment and higher job satisfaction. Knowing that a future plan is available, also reinforces an employee’s career development.
Leadership and employees are better equipped to share company values and vision when there is a clear plan.
HOW WE HELP WITH SUCCESSION PLANNING
When it comes to selling a business in Australia, having a clear exit strategy in place is crucial.
Working with tax and business advisors means that you are more likely to achieve the best outcome and take advantage of the tax concessions available to you at the time of transition. Business owners in Australia who work with professional advisors can benefit from their expertise in identifying potential buyers, negotiating terms, and ensuring that the sale process goes as smoothly as possible.
For more information and assistance with your succession planning, our
Business Advisory team can help,
contact us today to find out more.