Planning to Go?
There is an old Chinese proverb: The best time to plant a tree was 20 years ago, the second best time is today. This is exactly the case with succession planning, the process of developing a business exit strategy.
Too often I’ve seen business owners lose the wealth they’ve built into their company by failing to prepare properly for the day they retire. In fact, succession planning is the most neglected aspect of wealth building by New Zealand’s small to medium enterprises (SMEs) and middle market businesses. If that sounds like an overstatement, then consider a recent survey showing that while 63% of business owners consider a well-developed exit strategy as important, only 17% are actively planning an exit*.
Taking time to plan for a successful exit that maximises the wealth we have created is an important aspect of working on our business. And not just for those who qualify for the Senior Citizen’s SuperGold Card! Clients we have assisted have included people in their 30’s and 40’s who are exiting for a variety of lifestyle reasons.
The implications of lack of planning can be quite severe. It is said that those who fail to plan, plan to fail; and this can be especially true in the area of exit strategies and business succession planning. For many of us, most of wealth is in our businesses and our homes. These assets will provide the foundation capital for much of the income generated to enable us to continue to live comfortably once we retire.
We are presently experiencing the impact of the global recession on house prices with many pundits picking that there is more pain to come. The same could be true of the value locked up in SME’s. In situations where planning has been lacking and the work has not been done in advance to prepare the business for sale, we might end up losing much of the potential value because the business has to be sold on price alone in a buyer’s market.
Succession Planning is the process of preparing in advance for an exit from your business in a way that maximises the wealth built up in the business. “But”, you say, “aren’t we in the midst of an economic downturn? Isn’t it the worst possible time to consider selling a business?” In general, “Yes” to both questions, but, given that it can take from one to five years to fully implement an exit plan, now is a great time to get started so that you and your business are well positioned to maximise value when the economy recovers.
Succession planning ideally requires a team approach, including, amongst others; you, your spouse and close family, your business and legal advisers, and others. Your accountant can help to get the process underway by identifying your expectations and requirements and then accompanying you through the entire process. Don’t delay – the time is now to start planning a successful succession for your business.
Tel: +64 9 272 0871
Fax: +64 9 274 0863
Level 2, BDO House, 116 Harris Road, East Tamaki
P O Box 51 563, Pakuranga, Auckland 2140
Why Choose Us?
- Quick & easy application & 48 hr approvals
- We are flexible, owner operated and we love small business
- Supported by large international funds and able to fund at a competitive rate
- Backed by the experience of Working Capital Solutions