An event on succession planning just as we’re all into gear for 2016? Absolutely!

The clear message from our first Insight Series event for the year – Succession planning: Transitioning yourself and others to a new world – was that you need to start years before you want to make your move.

A 2012 survey showed that less than 30 per cent of businesses had formal succession plans for management, control and ownership. Too many business owners throw away their life’s achievements by failing to adequately plan for succession. However, this goes well beyond ticking a series of boxes to make a business saleable. Effective succession planning runs deep and starts early – and this is where our three guest speakers brought their extensive expertise in working with owners and entrepreneurs. We were privileged to hear from Rob Ashley, Principal Business Strategist – Private Clients of PwC-fame; Rod Douglas, Managing Director of Successytems; and Luke Perkins, Relationship Director – Premium from Westpac.

Rob focused on having the right financials to maximise value, using his well-known Financial X-Ray® to show the importance of developing a detailed financial map. He said owners can leave ‘a lot of money on the table’ if they don’t get this right. They can also proactively take action to drive perceived value higher and minimise risk. Some of his advice included:

  • Have ‘line of sight’ so you can demonstrate a bright future for your business
  • Make yourself redundant, with a strong management team able to provide continuity
  • Do your housekeeping, such as documenting your processes secure your IP, to avoid losing out due to ‘hygiene factors’
  • Understand your ultimate buyer today and begin building those relationships.

His Financial X-Ray® looked at several guiding principles governing the health of a business. He showed how having visibility over your financials – not just a P&L but a comprehensive picture of capital, investment, borrowing, cash flow and more – provides the confidence to scale. And then, your success comes down to daily rigour. Being financially fit and ready to sell starts today!

Rod provided the critical addition to the ‘how’, saying that all owners need to ask ‘why’ they are selling. Is it because they’ve had enough, or want to do something different? Whatever the reason, the personal and professional ‘why’ impact the broader ‘how’ – and the ability for a business to make the transition successfully. Rod’s work with high-growth businesses focuses on culture, strategy and value – all central to succession planning. It starts by drawing the vision out of the minds of owners to ensure their people are aligned and know what needs to be achieved, and then for owners to replace themselves on the journey. The line between your vision (where you want to be) and where you are today becomes your strategy, determining how you will allocate scarce resources to get there. Then, the biggest challenge is often a business’ ability to create consistent and repeatable growth as the key driver of value beyond simply ‘profit’. This brought in the people factor and their capacity to grow on the journey. Rod wrapped up with the pivotal reminder that we all bring our future toward us by the work we do today.

Luke shared anecdotes of success and failure he has seen across his career, offering key advice in relation to succession planning:

  • You need flexibility and options available to you in relation to your bank – in general and in getting ready for sale
  • Owners who have one eye on succession but don’t deal with it early generally lose out
  • Similarly, owners who don’t prepare or let their people know what they are thinking weaken their end position
  • Avoid making assumptions about what your business partners, potential family member successors or key stakeholders want or expect – have the necessary conversations now
  • Involve outside expertise both in succession planning and getting ready for sale
  • Understand that people ultimately influence the sustainability of growth.

We have had excellent feedback from the event, including from those who aren’t nearing a succession proposition but see the importance of building the disciplines discussed in their businesses.

I’d welcome hearing about your experiences, learnings and successes in relation to succession planning.