13 Oct Do You Need a Business Succession Plan?
If you own and operate a business, do you have a plan for the unexpected?
A business succession plan is just that – a plan for your business and finances should the unexpected happen such as a death, injury, or illness of a key employee or owner.
If you own and operate a company, succession planning is probably not at the top of your priority list right now, but it should be. It will help you through the shift and enable you to solidify your mission, develop your top employees, and strengthen your current position.
How does a business succession plan work?
A business succession plan takes into consideration the likely risks to a business and its profitability with the aim to minimise risks and plan for unexpected circumstances.
Examples of circumstances that need risk minimisation include:
- The death of an owner or key person
- Severe illness or injury or a business owner or key person
A business succession plan starts with the legal interest each owner has in the business and their rights. It also includes provisions and mechanisms to give continuing owners the right to buy the interests of a deceased or disabled owner – at a pre-determined price.
The sudden loss of a business owner or key person can have a significant impact on not only the staff of a business but also the profitability.
Plus, a business succession plan includes planning for business debts or loans. If your business partner was to pass away, any debts or leases you share can fall onto your plate. A business estate plan can ensure that debt can be retired by the continuing owners through either the use of business capital, a new partner buying into the business, re-finance, or an insurance policy
Who needs a business succession plan?
Business succession planning is essential for any business that wants financial security and profitability in the long run.
It’s always wise to plan for the unexpected especially if your own personal lifestyle relies on the success of your business.
Specifically, there are 2 questions you can ask yourself to determine if you need a business succession plan:
1. Would your business be able to pay for a departing owner’s share of the business if they were no longer around?
2. Would your business be able to cover the loss of revenue and repay the debts of the business if the owner or a key person were no longer around?
If your answer is no to one or both of these questions, you should consider seeking financial advice and developing a business succession plan.
Business Succession Planning in the Central Coast
At Leo Wealth, our financial planners can support business owners to create an effective business succession plan.
If you are looking for financial advisers in Central Coast, NSW, talk to Leo Wealth.
Our focus is on creating personalised financial planning strategies for business owners, families and retirees. Do you need support with your business succession plan?