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Whether a business owner is planning to hand over the reins of their business to the next generation or preparing to sell, the key for a smooth transition is to have a clear plan and start the succession process as early as possible.
Nexia New Zealand Partner Philip Goodman works with a diverse range of SMEs to help them focus on the desired outcomes for the end of their business lifecycle and to formulate a plan to reach their succession goals.
Ideally, business owners should consider succession planning when they approach the middle of their business lifecycle and include this in their annual business review; however, life changes and other circumstances can necessitate a faster approach to succession planning.
“In the optimal situation, business owners would consider what they would like to happen with their business when they step back as their business matures so they can explore options and create a plan that can be executed over the longer term.
“When this is not possible, I suggest a minimum of three years to prepare a business for its next phase, whether this involves selling the business, or passing it on to the next generation or a business partner. With a larger or more complex business this process could take up to five years to complete.”
The initial step in the succession planning process involves determining the desired outcome for the business and building strong relationships with clients.
“We pride ourselves on getting to know our clients and exploring different options for succession planning. If it has been a while since the client looked at their options, the situation may have changed. For example, the son or daughter who has been earmarked to take over the business now has different plans, or the market for selling a particular type of business has changed.
“This work takes time and is based on a foundation of trust because there is often a lot of emotion involved in business succession.”
Once the outcome has been determined, Philip identifies key risks and talent within a business that the owner wishes to retain. It is important to meet collectively with all partners involved in a business and to analyse the overall business and any areas or people that could be resistant to change such as employees or shareholders.
The legal, financial and governance structure of the business requires careful examination, along with external factors such as the economic situation, key competitors, and the market for business sales.
Philip describes his role as a mentor and coach throughout the succession process, while also keeping clients accountable.
“It can seem overwhelming when you consider exiting your business but once we break it down into manageable steps and have a timeframe then it is achievable. We work together to achieve the best possible outcome for business succession.”
Nexia is one of New Zealand’s best accounting and business advisory firms with offices in Christchurch, Auckland and Hawke’s Bay. For expert insights and assistance in navigating the complexities of business succession planning, reach out to your local Nexia Advisor. We specialize in working with a diverse range of businesses, helping to define plans and achieve smooth transitions for the next phase of your business.
