In basic terms, succession planning is the process a business or family goes through to determine what each participants' role will be when the existing business owners, farm owners, or key employees enter into retirement or decide to exit the business. Many business owners or farming families take the approach "I'll deal with that when it comes to that point" – however good planning years in advance can improve the end result significantly, in terms of business value, having a saleable business, appropriate knowledge transfer, family relations and importantly, having everyone work towards the same end game. Every family and business situation is unique but undertaking the basic steps towards succession planning will start to give all family and business participants a clearer picture of the future.

Some basic steps that you can take now for succession planning include:

  1. Understand what your goals are in terms of retirement age, how much money you will need to retire, where you want to live, what you want to do and importantly – what do you want to do with your business? This relates to any business owner (e.g. retail, trades, construction, farming etc.). You might need to consult a financial planner at this point to determine what your financial goals should be.
  2. Once you understand what you want, ask your family members to consider what their goals are. For farming families this is critical as often the younger generation have been involved in the farm for many years without any open communication of goals and finances. Business owners might find that a family member wants to take over the family run business, or perhaps that an existing employee is interested. Make no promises when having these discussions, this is purely a fact finding expedition.
  3. Organise a meeting with your accountant and lawyer to determine the accounting, tax and legal implications of ideas that you might have for succession and assets. The financial and legal outcomes won't necessarily stop any of your plans, however if these conversations are held years in advance you will have more time to plan for them.
  4. At this point for farming families in particular, discussions can at times get heated and complicated. You will be possibly discussing who gets certain assets, be it houses, land, stock, non-farm investments, who will run the farm, financial arrangements, who has worked on the farm previously and were they paid appropriately, and even possible leasing arrangements. Remember that succession planning for farming families will often work towards an equitable outcome that won't necessarily be equal and this can cause some distress. You might find it easier and more productive to get a neutral mediator involved to run discussions, along with your lawyer and accountant.
  5. Sometimes a second or even third meeting is required to reach a final plan or arrangement. Once you have decided on the outcomes write a succession plan that outlines each step required and a timeframe. Ensure that this plan is made available to all participants, or if some information is personal and not appropriate to share, prepare plans for each participant so everyone knows their roles, tasks, goals and timeframes. It is important to include in these plans all steps you need to take to get your business ready for sale or transfer. For some businesses this process can take five years when all knowledge, processes and relationships sit with the business owner.
Check in on your succession plan every year – situations changes so it is important to update your plan when necessary.

If you need help getting started on succession planning and would like help from a facilitation, accounting or tax perspective, please contact our Business Advisory team on 9842 5155.