Well-managed businesses plan and budget for sales, expenses, cashflow and growth. At the same time they should also plan for and anticipate the various changes that occur to a family business which are caused through death, disability or retirement of a key person or any other event that may cause problems within the business.
It is estimated that the vast majority of family owned businesses do not have a formal succession plan in place. Ignoring considerations as to the financial arrangements and rearrangements that will be necessary in a family or business in the event of the death, disablement or retirement of family members, can dramatically affect the value of a business. The worse case scenario – the business itself could collapse and the family would be left with immense problems.
Unfortunately, just as night follows day, retirement and then death will occur to all business operators. After all the sweat and toil that has gone in to establishing a business, some consideration should be given to what will happen to that business when the current principal or key persons are no longer available. The best time to start succession planning is at the very beginning of the life of the business.
What would happen if …………?. Is a good question with which to start.
Article by Christie Lewis
Christie is Practice Manager at Alan Lewis Accountants . Besides accounting, her passion is for all things small business (and blogging, of course). You can contact Christie directly at christie@lewistaxation.com.au.
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