SUCCESSION PLANNING - SMALL BUSINESS

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Small business owners in Australia are getting older.  It should be no surprise that the ‘baby boomer’ bubble that exists in the broader community is also evident in the SME community.

The area of succession planning is important as an increasing number of small business owners look to exit their business.  For many this exit will be brought on by retirement, however this is not the only time when business succession needs to be planned for. Family run businesses move through a life cycle and it becomes time to realise the capital value and move on.

Many business owners have limited superannuation.  Without realising the assumed capital value of their business, they will be forced to:

  • Stay within the business for a much longer period than planned; or

  • Accept a significant reduction in their standard of living

The focus of a sale of business will generally be on either price or value.  However, many small business operators are not in a position, nor have the skill set to maximise the value of their asset and this will leave many to negotiate on price alone. The likelihood is that most will achieve a sale by discounting.

Capital Gains Tax (CGT) can also prevent a sale from occurring.  Forward planning on a sale and discussions on the CGT implications is an important element to the overall strategy.

It is important to talk to us early about your forward plans and changes that are occurring in your business environment.  Preparation over a 3 year period for succession planning is not unreasonable.  Doing it too late may lead to issues being addressed too late and/or missed opportunities.

If you haven’t yet thought about succession planning, now is the time to call us to discuss.