Business Succession Planning

Running a business or farm can be challenging; whether it be a family affair or a number of unrelated parties. When everyone is on the same page and working together, it can be an incredibly rewarding experience; both personally and financially. But what happens if something goes wrong?

 

Let’s consider a couple of examples:

 

1. You might have set up a business with your best friend and it’s been running smoothly for years. But what if your best friend suddenly falls ill, or worse still, dies? Can the business still afford to pay them if they aren’t working? Can you still run the business without them? Who owns their share of it? Do you want to be in partnership with their spouse or relative that may inherit their part of your business?

 

2. You’ve run the farm or business with your 2 sons for years. Apart from the usual disagreements when someone decides dad doesn’t always know best, it’s been a great business. Now Dad’s getting on a bit in years and decides it’s time to retire while he’s still young enough to enjoy life a bit. But hang on a minute. Has there been enough put away over the last 30 years to fund that retirement? All the profits have gone back into growing the business and building that as the main family asset. If not, can the business continue to provide him with an income if they have to employ someone to do his job? And much of the debt was always in Dad’s name. Will the lenders allow that to continue if he’s not involved in the business any more? And does Dad want large business debt in his retirement that, if the boys don’t run the business properly, calls on him personally for the liability?

 

Small business owners are confronted with these sorts of dilemmas every day of the year. They can destroy a business that is decades old, in a matter of months.

 

There are too many examples to consider. The important point is that most problems can be overcome with proper planning before the event occurs. For want of a better description, we act as the “project manager”. We certainly don’t profess to know all the answers. So we liaise with your solicitor, accountant, lender and whoever else might be involved, or can recommend someone if needed, to make sure that all of the possibilities are looked at and your business is structured in a way that will minimise a problem when someone has to exit the business; either unexpectedly or voluntarily.

 

 

John & Melissa are Authorised Representatives of  FB Advice Pty Ltd

Australian Financial Services License Number: 506314  ABN 51 624 475 181