Succession planning is a crucial aspect of business strategy. Having a clear exit plan ensures that all parties are prepared for a smooth and successful transition. Trends show that succession planning is starting earlier than ever, and we’ve even seen clients begin mapping out their exit strategies during the establishment phase of their new ventures.

Key Considerations for Your Succession Plan

Engage Potential Successors Early

Include all potential successors in your planning process. Understanding their ambitions and expectations is essential for a well-aligned transition.

Clarify Financial Expectations

Determine whether your successor will be purchasing the business at full market value or at a discounted rate. This decision will affect both your retirement planning and the successor’s financing needs.

Plan for Retirement Funding

If your business’s current value won’t support your retirement goals, start working now on a business improvement strategy to increase its value prior to transition.

Assess Financial Needs Post-Succession

If you're accepting less than market value, carefully evaluate your post-exit financial requirements and adjust your plans accordingly.

Review Business Structure

Understand how your business’s assets and liabilities are structured. Will the existing structure be passed on, or is it more appropriate to establish a new one?

Consider Tax Implications

Investigate potential stamp duty and capital gains tax consequences when transferring assets or changing structures. Professional advice is highly recommended.

Develop a Transition Timeline

Map out a detailed succession timeline, outlining each step and milestone of the process. This helps ensure that nothing important is overlooked.

Transfer Knowledge and Skills

Allow enough time to pass on the operational knowledge required to run your business. Where knowledge gaps exist, consider additional training or mentoring for your successor.

Mentally Prepare for the Transition

Think about your post-succession life. What will you do with your time? Where will you live? What hobbies or pursuits will you take up?

Communicate and Document Your Plan

Be transparent. If you have an ideal succession plan, discuss it with the relevant people and document it clearly—even if it's years away. This can be critical if you're unexpectedly incapacitated.

Plan for Financing in Family Succession

For family businesses, consult your bank manager to ensure your successor can access the necessary finance when the time comes.



Update Your Will

Align your Will with your succession plan. This ensures the transition can still occur if you're not around to manage it. Make sure your executor is capable of running the business if needed.

Cut Financial Ties After Exit

Ensure you're no longer financially responsible for the business once succession has taken place. This protects your personal finances and provides a clean break.

At Smith Thornton, our business advisory team has had a busy year helping clients develop and document effective succession strategies. If you’d like to explore your options, we’d be happy to assist.