Succession planning is often overlooked when compared to the day-to-day pressures of running a family business.
However, with 60% of small business owners approaching retirement age, there has never been a more important time to ensure the orderly transition of your family business to the next generation of family members.
Recently, Family Business Australia and the Australian Small and Family Enterprise Ombudsman produced an “Introductory guide to family business succession planning”. This resource provides an introductory guide to navigating family business succession and seeks to ensure family businesses consider their future.
Family business succession planning provides clear benefits, with numerous options available to transfer a family business when the time comes.
Succession Planning Benefits for Family Businesses
Taking a long-term perspective to the future of your family business has important flow on effects.
For yourself, succession planning starts a dialogue with family members concerning the future of the business, makes arrangements for the continued operation of the business should you become incapacitated and allows you to start mentoring your successor.
Looking to the future can ensure the business continues to provide for your family financially and allows you to secure roles within the business for family members.
Succession planning also maintains the performance of the business, facilitating a stable transition with consistent service for customers and allowing the business to be sold at maximum value as a well-managed going concern, should you or your family members decide to sell.
Options for Family Businesses when Succession Planning
When succession planning for your family business, it is important to consider all of the options available.
After working a lifetime to grow your business, you may wish to transfer the business to a family member or multiple family members. When transferring the business between generations, it is important for you to consider which family member the business will be transferred to, whether more than one family member wants to operate the business and how the profits and ownership of the business are to be shared.
You may decide to call time on the business and pass it into new hands, outside of the family. Where this is the case, you can choose to sell the business. In such circumstances, it is critical to negotiate the sale of the business and prepare a comprehensive sale of business contract.
Finally, you may prefer that the business come to an end once your time operating the business is over. Liquidating the company can allow you to end the business and extract the maximum value from its assets.
Overall, clear benefits exist for those family businesses which undertake succession planning, with a range of options available to be considered.
Having advised businesses for over 130 years, RMB Lawyers are experts in assisting your family business engage in succession planning. For advice concerning succession planning in your family business please contact RMB Lawyers on 1800 681 211 (free call) or email rmb@rmblawyers.com.au.