RSM recently surveyed 2,000 NSW-based business owners, consultants and directors, and found 66 per cent of them didn’t have a formal succession plan in place.
These numbers are likely to be replicated across the country, in many different types of businesses, RSM said.
“Most business owners don’t start or buy a business with the end in mind. But they should. Exiting the business is inevitable, regardless of whether business owners intend to run it until they retire, bequeath it to a family member when they die, sell it once it starts turning a profit, or any number of other options,” Patrick Flanagan, director of business services at RSM Australia, told AccountantsDaily.
“Failing to plan for this exit could have disastrous consequences. By contrast, a well-planned exit can deliver much-improved capital returns and minimise tax implications.”
RSM urged all businesses to put a succession plan in place, stressing that it is “never too early” to develop one.
“While the business owner may plan to stay in the business long-term, unforeseen circumstances may force an early exit. If the owner already has a plan in place, it then becomes a matter of activating or accelerating that plan,” said Mr Flanagan.
“Fundamentally, the succession plan must answer three key questions: who will take over the business; when will they take over the business; and how will they take over the business?
“This includes considering the business’ legal structure, whether it will be passed to the successor through purchase or as a gift, how funding will be arranged, and whether the current owner will continue to play a role in the business after a handover.”