Many family and small business owners only begin thinking seriously about succession planning when on the verge of retirement.

However, the Monash University Family and Small Business Research Unit says that this is often too late.

The unit says poor succession planning is commonplace and has in the past led some family and small businesses to suffer lowered morale, reduced output and a decline in profits or even closure.

Experts have warned that planning should not be a snap decision but rather a methodical process over years or decades to successfully navigate what can be a financial, legal and emotional minefield.

So, if you are yet to decide whether your business will go to a family member, current employee or be sold, the best place to start can be gaining information from federal and state government websites.

The federal government’s website business.gov.au recommends planning an exit well in advance to maximise the business’s value and enable a smooth transition with less likelihood of disruption to operations.

According to the Business Victoria website, “a family succession plan can incorporate business trusts, gifting, sale or part sale to family members . . . while a non-family succession plan can involve full or part-sale to minority or employee owners or alternatively be an open market sale”.

According to Business Victoria important questions to consider include:

• how long you will need to work and the amount of income necessary to enjoy a comfortable retirement;
• whether you want an ongoing role in the business and if you have maximised its value;
• deciding when or if family members are ready to assume control and ensuring you communicate your direction and decision;
• considering how relationships between family, management and other employees may change on your departure; and
• in the absence of a suitably qualified family member, considering current employees or a new owner.

Lawyers can examine the legal implications of your plan and assist in both minimising potential conflicts between buyer and seller and maximising the interests of family members and existing business partners.

See www.business.gov.au for the federal government website or www.business.vic.gov.au/BUSVIC/STANDARD/1001/PC_62290.html for the Business Victoria website.

More information:
From the LIV Bookshop: Estate & Business: Succession planning (edn 2), by B Evans, 2009, $175