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“I was galloping on a crystal horse, and then crashed into a brick wall. My wife had to pick up all the splinters”

Succession planning, estate planning and risk insurance – why it’s best to address them today for tomorrow’s success

Retirement often seems like a distant speck on the horizon, let alone plans to hand over the business. However, establishing a sound business succession plan is beneficial for most business owners and can be absolutely necessary for some.

Take for example a business owner who was running a number of very successful activities all within his business, organised very adeptly by his doting wife and providing a lifestyle for both them and their children. Life was simple but very good.

When some niggling health issues persisted and could no longer be ignored, further diagnosis confirmed that the problem was extremely serious and required immediate treatment which took the business owner out of commission straight away.

It did the same for his wife who was constantly by his side as treatment got underway and a slow recuperation was prescribed. Often we think that if one business owner is winged, then others can carry on but this is not always the case, especially in a family business. His take on all of this was, "I was galloping on a crystal horse, and then crashed into a brick wall. My wife had to pick up all the splinters”.

We all retire whether we plan to or not so plan today, relax tomorrow, retire whenever

Fortunately there is a somewhat positive ending to the drama. But the warning did not go unheeded. As soon as it became sensible to do so, the business owners met with Collins Hume about their existing succession and estate plans, and to review their provisions for risk and insurance.

Prior to our meeting and seeking advice, they were not planning to sell their business for at least another 5-10 years and were certainly at a loss as to how to best to operate at minimum capacity in order to build business value to be in good shape to sell. Yet through our discussion and subsequent planning we were able to help the business owners achieve all of these objectives:

improve and streamline the business's internal operations to reduce reliance on the owners
provide key staff members with the training and support they needed to run the business and maintain an income for the owners
maximise the business valuation by reducing the inherit risks associated with the reliance on the owner
prepare two of their business interests for immediate sale and obtain a price superior than what the owners were expecting
have their third business interest ready for succession to their employees and maximise the finance they were able to obtain to purchase the business

Succession planning, whilst vital to business, is unstructured and lacks investment

Research reveals that companies are realising that succession planning is no longer simply a ‘rescue plan’ to manage the exit of key stakeholders from a business. Yet, although 94% of respondents said succession planning was important to their business, as little as 5% of HR budgets were invested in this activity.

Astoundingly, succession planning is still in its infancy, with only 51% of businesses currently implementing succession programs and 83% having only implemented the programs in the past five years. Whilst they continue to invest heavily in growth for example, many aren’t taking the necessary steps to protect and retain that investment through succession planning.

Peter Fowler, Collins Hume Partner and Business Strategist says, "Whilst we obtained a great outcome for our clients we cannot stress the importance of having a thorough succession plan, estate plan and risk management plan for any unexpected events. You don't want to leave your loved ones to pick up the pieces".

Talk with one of our experts about succession, estate planning or risk protection for you and your business today by phoning 02 6686 3000 or emailing mail@collinshume.com.au.

Collins Hume is a CPA business

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