Tool Box
Issue No. 20 - December/January 2005
7 Keys to planning family succession
by Sue Prestney
1. Recognise the link between estate/retirement, succession and business planning
The 2003 Australian Family and Private Business Survey commissioned by Boyd Partners Limited and conducted by RMIT University found that family business CEO's typically intend to retire within the next 10 years. However less than 25% of family businesses have a written management succession or ownership succession plan.
While the level of succession planning is low, so is the level of long-term strategic business planning - with over 52% of family businesses not having a formal strategic business plan. Further, the survey found that less than 50% of family business owners had adequate superannuation and were relying on the continuing business or realisation of business assets to fund their retirement.
The first step in succession planning is to realise the link between the succession plan, the retirement plan and the business plan. None of these plans can succeed individually .
Linking the succession and retirement plans
How can you pass the business on to someone else unless you have first adequately catered for your own needs on retirement?
The RMIT survey found that 27% of family business owners were relying on the continued ownership of the business to fund their retirement.
How confident can they be that the business will continue to be profitable and that their share in those profits will be adequate to support their lifestyle?
What happens if the business suffers a downturn or simply needs to retain profits to fund capital growth, given that the most important source of capital for family business is retained profits?
If you are a family business proprietor, how will your spouse cope with these issues in the event of your death?
Little wonder that one of the major succession problems is the unwillingness of the retired CEO to let go of the business.
Linking the succession and business plans
The...
