Succession planning? Follow our template for success

What are the best practices when planning for succession? Is there a model you can follow?

The truth is, there are many different approaches. Here we share our template for developing the best succession plan.

1. Collect and analyse information 

In this first phase, you (or your advisers) would conduct a series of confidential interviews with business owners, key management and/or family members to uncover both your immediate and long-term objectives.

From an operational perspective, this allows you to identify potential obstacles to your intended succession plan and put processes in place to resolve them. From a personal perspective, it ensures that current wills, shareholder agreements and financial resources reflect your aims.

This phase also affords you the opportunity to ‘meander through your mind’ to uncover the factors that truly underpin your business philosophy, family relationships and personal concerns.

2. Assess strategic and wealth enhancement opportunities 

The second phase involves brainstorming a range of potential solutions with your advisers, which will address your succession planning goals. Through strategic planning sessions with your key personnel and/or the creation of a family council, you can solicit input from all your stakeholders to ensure your plans take everyone’s varying needs into account.

This second phase also helps you consider opportunities to improve the value of the business over the short, medium and long terms by identifying the actions you can take to improve cash flow and reduce perceived or actual business risk.

3. Design, develop and implement your plan 

At this stage, the steps you take will depend on the structure you’ve selected for your succession. For instance, for family-owned businesses, if you plan to pass the business on to a family member, this is the time to identify your successor and help them develop the expertise they need to assume control of the business.

For owners or investors who plan to sell the business, this is the time to put processes in place to maximise business value – from benchmarking against your peers, rationalising business lines and identifying service gaps to shoring up your balance sheets, extracting personal assets from the business, generating competing bids and, if selling internally to management or other family members, arranging for the financing required to effect a successful transfer.

If you’ve given yourself a long enough runway, you also can enhance the odds of reaching your succession planning goals by developing parallel succession plans – one that can be implemented immediately in the event of an unforeseen emergency; a second that you can implement in the mid-term (within one year) to begin closing any identified gaps; and a third that lays out your long-term intentions (five to 10 years) and contemplates a variety of financial models that account for different contingencies or scenarios. Here is where a proven process is invaluable. Many strategic plans, business models and succession plans never make it from concept to reality.

4. Review and monitor 

As the business and/or family dynamics change over time, your succession plan must change with them. Be sure to schedule regular reviews of your plan to ensure it remains current and continues to reflect your evolving wishes. Be sure, too, to communicate any change of plans to your key stakeholders so no one is blindsided when the time for a business transition arrives.

Further help

This four-phase process is recommended by Grant Thornton firms as a way to help you uncover your real succession goals and objectives. This information has been extracted from our 'Succeeding at Succession' series of white papers.

If you have any questions on succession planning or are considering selling a business, contact our Corporate Finance team for tailored, individual advice.