You are the driving force and inspiration behind your business, so what will happen to it when you leave?

Most business owners want the business they've worked hard to establish to continue to thrive when they leave, whether it's in the hands of a family member or a new owner.

A succession plan will secure the future of your business.

1. What is a succession plan?
2. Retention planning - keep it in the family
3. Buy-sell planning
4. Do I need a succession plan?
5. How do I develop a succession plan?

What is a succession plan?

A succession plan is a strategy which determines the best way for you to exit your business while ensuring the business continues. The plan determines who will take leadership and/or ownership of the business when you leave. There are two main options to consider when developing a succession plan:

Retention planning – keep it in the family

Many owners choose to keep the business in the family when they leave. If you plan to transfer your business to a family member you need to consider the legal obligations as well as the impact on family relationships.

Visit the Federal Government's Succession Planning for Small Business website for more information and talk to the WA Chapter of Family Business Australia

Buy-sell planning

(selling the business to external parties, like employees or businesses)

Buy-sell agreements are legally binding contracts which control when owners can sell their interests, who can buy an owner's interest, and at what price. They are mostly used to ensure the smooth continuation of a business after a potentially disruptive event, such as an owner's retirement, incapacity, or death.

For more information go to Selling a business and visit the Federal Government's Succession Planning for Small Business website for more information.

Do I need a succession plan?

A succession plan is essential to securing the future of your business. Without a plan, the future of your business will be left to chance once you've gone.

With so much at stake a succession plan is vital and will help you to:

• maximise the value of your business if you decide to sell;
• unlock that value by enhancing the marketability of your business; and
• exit your business with maximum profitability and the foundations laid for its continued success.

Visit the Federal Government's Succession Planning for Small Business website for more information

How do I develop a succession plan?

There are no rules about what your plan should cover or the level of detail it should contain. Among other things your plan will depend on your objectives, family situation, financial position, health and age.

To be successful a plan should be realistic, workable and developed with input from groups and individuals who have an interest or share in the business. You should also talk to your business advisors such as your accountant, lawyer and financial advisor.

Here are a few questions to consider when developing your succession plan:

• Who will be your successor?
• How much is your business worth?
• What sort of management strategy should you adopt for existing staff to ensure a smooth transition?
• How will your departure affect key business relationship such as suppliers and major customers?
• Do you need to establish an estate?
• Do you need provisions for active and non-active family members?
• How much income do you need to retire/leave the business?

It's important to ensure that your plan is realistic and achievable. Once you've designed the plan, it's a good idea to set a timetable for completion and to schedule key milestones along the way to help keep you and your successors on track towards a smooth transition.

or an easy to follow step by step guide to developing your succession plan visit the Federal Government's Succession Planning for Small Business

What's next…

• Are you ready to sell your business?
• Do you want to close or wind up your business?