“Thinking is the hardest work a [wo]man can do”
During the Retirement and Estate Planning process, “Ownership of Assets” forms part of the discussion. Where one of the assets is a business, and it is a primary contributor to the Estate, it makes perfect sense to ask a number of provoking, asset-protection, risk-minimisation questions.
The questions are best offered from both a proactive and a reactive viewpoint.
Taking such initiative is paramount for ALL business owners who seriously want to successfully transition their business while they are in the best position to do so. In most cases however, business owners will not have commenced the all-important discussion about what to do when the time has come to finish, to exit, to essentially not run their business any more, whether that be by choice or otherwise.
By being given structure to think through all the elements of a strategic Succession Plan, the ultimate benefits will be delivered at the time of the Estate Plans execution. However prior to that, the benefits are in the proactive nature of the action taken, both in knowing that a plan is in place as well as being actively worked towards.
The reactive component is where the business owner does not want to entertain this discussion at all. By not doing so, when in a position to influence the exit outcome, the business owner may instead think it will all sort itself out in the end, after they’ve gone. To some extent, this is correct. Ultimately, it will get sorted, but in the way the business owner had envisaged? Possibly not.
If the business is a core-contributor to the Estate, then looking after what happens to that source becomes very important. So to Start with the End in Mind TODAY regardless of how old the business is assists in shaping and executing their outcome of choice.
So why is this so important?
In 2015, the state of the market is as follows:
- >500,000 businesses in Australia are operated by 55 year-olds;
- Equalling 28%, approx. 1 in 3-4 businesses will be looking to turn over in the next 5-10 years, either by choice or not;
- The business may be the second largest, if not the largest asset owned, therefore it needs to be handled accordingly.
The following is a series of questions to help prompt the discussion, and therefore start the thinking…
In order for a business owner to Start with the End in Mind TODAY, what has to happen?
- Is a Succession Plan in place? If yes, how old is it?
- If it had to be executed immediately, does it make sense?
- Is it addressing what really needs to be addressed?
- If selling is an option, does the business appeal to a buyer in its current form?
- Is it set up to be able to “hand over” to a third party?
- Does the business have an online presence? If not, why not?
- How are the business records looking?
- Does the reporting of the business (e.g.: to the ATO) reflect its complete “value”?
- Alternatively, is now the prime time to acquire another business to help fill gaps, if that’s possible?
Where is the business at right now vs. where does it want/intend to be?
- If the Business relies solely on the business owner then the impact could be catastrophic if the business owner is no longer accessible. What steps need to be taken to reduce the risk/potential damage?
- If looking at a buy option, will acquiring another business get the business there more quickly?
- Is there the option to do both i.e. build/acquire to grow and then exit once all in place?
Based on where the business is now, and what is wanted long-term, will determine the gaps to be filled.
When is the right time to execute?
- If selling, what asking price will be required when ready to execute?
- How far off is that, realistically?
PLUS, and equally as important…
- What will you as the current business owner do post exit?
- What will be the implications for business/life partners?
- If the business is your “identity”, what then?
How to exit? There are a number of possible exit options e.g.
- Trade sale
- Management buy-in
- Family handover
- Partner buy-out
- Vendor finance
- ..just pack up and walk away!
To make this happen, who needs to be involved? Does the business owner have access to the following specialists in exit?
- Trusted Advisor
- Business Broker
- Business Advocate (if acquiring)
- Board member
- Have they considered who might be interested in buying the Business?
If the business owner is already having the Estate Planning conversation, they’re partway there. Getting access to the specialists noted above can easily be arranged, so there’s no reason to get stuck.
It may just be about setting them on a path of thinking about Starting with the End in Mind TODAY, regardless of how old the business is (or that they are for that matter) that a few of these questions will prompt.
the entrepreneurial mother®
specialising in Finishing Unfinished Business!introduce yourself at