SME Succession Plans

The ability to find a suitable successor is a major problem with SME's particularly successful companies with good reputations that are perceived to have an umbilical link with the original founders/owners. A large majority of SME's fail to survive the original owners or having survived, fail to make a successful transition from one set of owners to the next, or even worse, fail to find managers to replace the original owners.

Succession planning is critical for growing companies as they represent a risk to the business both in terms of business continuity and survival. Whilst most SME’s recognise the need for a proper succession plan there is an equal (and often justifiable) reason for holding on to the reins of the company to the very end. Linked to this is the decision  on retaining cash flows for growth versus the decision to pay out the cash flows for tax or other reasons.

Key benefits of succession planning are:

1. The future of the business and business continuity is assured; this in turn reassures staff on the longevity of the firm and the reduced risk to the security of their jobs; In SME’s with ageing owners this can be a critical point for staff retention;
2. They provide for exit strategies to SME owners;
3. They preserve the reputation and branding of the company long after the original owners have exited the company.

Allan Rodrigues of The Business Farm specialises in Succession Plans. If you do have any questions please feel free to contact him on allan.rodrigues@thebusinessfarm.com.au or Sam Fairhall in New Zealand on sam.fairhall@thebusinessfarm.co.nz