Page 26 - Australasian Paint & Panel May-June 2021

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Business Matters
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PAINT&PANEL MAY / JUNE 2021
INDUSTRY SURVEYS HAVE HIGHLIGHTED THAT MORE THAN HALF OF BUSINESS OWNERS HAVE NO SUCCESSION PLAN. CRAIG WEST OF SUCCESSION PLUS GIVE YOU SOME TIPS TO GET YOU GOING.
STRATEGIC SUCCESSION PLANNING
USINESS STRATEGIC SUCCESSION PLANNING WAS
never heard of 10 years ago - however business owners should now understand that succession is a significant aspect of the success of their business. Steven Covey – author of the best selling book The 7 Habits of Highly Effective People lists habit number two is’ begin with the end in mind’. Covey says: “ if you want to have a successful enter- prise, you clearly define what you’re trying to accomplish.... the extent to which you begin with the end in mind often determines
whether or not you are able to create a successful enterprise.”
WHAT IS STRATEGIC SUCCESSION PLANNING?
Strategic succession planning covers all aspects of the busi- ness, but importantly focuses all attention on the end out- come –what are we actually trying to build within our busi- ness - is it something to fund our retirement? To list on a stock market ? To raise further capital and grow ? To pass on to other members of the family ?
Strategic succession planning means we have a detailed and documented plan covering every aspect of our business that continually moves us closer to our ultimate exit outcome. Most business owners are so caught up in running the busi- ness at a day to day level they do not have time, effort and at- tention focused on the end outcome.
WHY STRATEGIC SUCCESSION PLANNING?
In Australia more than 50% of business exits are currently a failure i.e. bankruptcy, liquidation, death or serious illness, divorce or simply walking away and closing the doors. This is largely because no succession planning has been undertaken by the business owner.
A survey conducted by the Monash University Family and Private Business Research Unit revealed that over the ensuing decade 60 per cent of private business owners are approaching retirement ( the first baby boomers actually turned 65 in 2011 ) and the ensuing transfer of ownership of assets and business equates to approximately $607 billion.
Approximately one third of Australian family businesses are expected to change CEOs over the next 5 to 7 years and whilst 53% are sure that the successor will be a family mem- ber, 83% do not have a succession plan.
WHEN?
In my view, strategic planning is all about time - the simplest analogy is to ask whether you would consider approaching a real estate agency today with a view to selling your property this Saturday - most real estate agents could actually achieve this. However, without any time to market, prepare the property and review their buyers database, the price they achieve will
not be the real value of the property. Most of the businesses I work with require a minimum of five years to maximise the value and prepare themselves to extract that value successfully.
We often see stories in the business media of well-known wealthy entrepreneurs making substantial money “trading” in businesses – they invest, build or grow the business, reduce the risk and then exit profitably making substantial gains on the investment over a few years. This is the best illustration of getting the exit strategy right. It is the ultimate test of success for these investors. If they don’t exit correctly they make no money!
HOW?
Our 21-step process begins with simply reviewing the position today, by undertaking due diligence,