The next tidal wave to hit Australian businesses – succession planning
It can take a lifetime to build a successful business, but few plan in advance for their retirement.
For the past two decades Australia has been in the enviable position of having a strong economy which has been underpinned by a large number of baby boomers (those born between 1946 and 1964) who have innovated and created valuable Australian companies. Often these businesses are dependent on the founders for their intellectual property and relationships with key suppliers and customers. The value of these businesses is estimated at over $3.5 trillion.
Prominent Economist and columnist for The Australian Bernard Salt has forecast that 81% of baby boomers will retire over the coming 10 years. Many of these retirees are the founders of successful Australian businesses who are yet to consider the multitude of issues with succession planning.
Succession planning issues may include:
- Depth of management team beyond the founders
- Transferring the intellectual property of the founders into the business
- Building key external relationships with others in the organisation
- Lack of governance and controls, or rigour in the accounting and finance functions
- Not being prepared for a business sale
- Taxation planning
- Not being aware of the options that exist
According to a recent Family Business Australia survey, less than 30% of businesses have formal succession plans for management, control and ownership, and where succession plans existed, they are rarely well articulated.
Toro Liberty has extensive experience in walking founders and owners of companies through critical succession planning issues. Many long term options exist which include:
- Selling the business to the existing management team (Management Buy-out)
- Selling the business to a competitor (Trade Sale)
- Listing the company on the stock exchange (Initial Public Offering)
- Accessing debt finance to de-risk personal wealth (Debt recapitalisation)
- Retaining ownership, but building a depth of management and forming an independent and experienced Board of Directors (Retention)
The above options are broad and require significant consideration. To maximise value to the founders, we recommend starting succession planning up to 5 years in advance of retirement. Toro Liberty has helped a multitude of family businesses with succession planning through:
- Preparing a business for a sale
- Helping to establish governance systems, strong financial controls, and transparent reporting
- Assisting with growth capital for acquisitions or organic expansion
- Assisting with a business sale
- Providing other corporate services such as valuations, financial modelling, and general consulting