What is Succession Planning?
Succession planning is a dynamic ongoing process that ought to start from the moment you become self employed.
As a self employed business owner, your succession planning needs to be kept relevant, current, and up to date with regular reviews. The actual planning involves several distinct processes. We need to remember that the average age of self employed business owners in New Zealand is 58, and the majority of these are looking to sell within the next 10 years.
Another very sound reason for succession planning is that you don’t actually know when it will happen. A leisurely, relaxed, controlled and planned succession may be your expectation, but actually rarely occurs. A large number of business owners are forced to sell up or simply shut the doors due to ill health. A moment of fate cannot be planned for, but it’s consequences can be.
- What do you as a business owner need to do in order to “ready” your business for sale?
- A good business needs to have a systemised and documented set of process and procedure.
- If the business is highly reliant on the business owner, this needs to be addressed.
- Are there key performance indicators in place that the business owner can demonstrate the success of the business to a potential buyer?
- Do you have a written business plan?
- Who will buy your business? A competitor? A staff member? An investor?
- How will a buyer fund the purchase of your business? Are you as the seller able to fund the purchase? Under what terms?
Two important questions to consider.
- What business am I in?
- Who are my customers?
At first glance these might seem obvious, but when you dig deeper you may be surprised at what you discover! For example what business is Ford in? The most obvious answer is they make and sell cars. Actually, they often sell cars at a loss and make most of their money through their finance company. You could argue that Ford’s main business is hire purchase.
What business is Fedex in?
Globally they are one of the biggest movers of packages and parcels. A closer look shows that their main business is logistics, and they make a great deal of money from their highly sophisticated software.
What about Succession First?
I am a major shareholder in a succession planning and insurance advising firm.
Do I sell insurance? Yes.
What business am I really in? Educating business owners about risk and succession solutions.
Who are my clients? Accountants, business advisors, lawyers are my main clients as they are the ones who work with me to advise business owners.
Once we as business owners identify what business we are in, and who our clients/customers are, our focus becomes more direct and our success rate lifts.
- What business exactly are you in?
- Who are your customers?