What is Succession Planning all about?
When you mention the word ‘succession’ the common reaction is to think of ‘retirement’. Whether it is the Family Farm, a Small Business or even the CEO of a public company or in the private company arena, the connection is immediate and usually without exception.
For Family Farms, small Family Businesses or a private company, succession usually connects with the founder and/or owner retiring and selling out to a third party or, as it more the case with our farming and small business clients, passing over control to a family member. Whilst these commonly held views of succession might not be incorrect, they do not accurately reflect what should be the real focus of succession planning for private companies and small family businesses.
The eventual retirement of a founder and/or owner may well be an outcome of a succession process but it is certainly not its purpose. Succession is the process of ensuring the continuity of a business beyond its current management. This is achieved through identifying and understanding the needs of the business, and the needs of the people taking over the business as well as the needs of the people moving out of the business.
At The Farm Protectors we think of succession planning as a process of evolution – Business Evolution. Enabling the compounding of wealth from generation to generation while ensuring family unity, individual growth and a sense of contribution, this is the essence of succession planning, this is Business Evolution.
When Does Succession Apply To You?
We believe that Succession planning is a key concern for anyone who has founded, owns or has an equity interest in any businesses trading under a partnership, sole trader or has private company structure or even a public company where they might continue to hold a significant controlling interest.
Your wealth is materially impacted by your ability to realise and /or transfer that interest to a third party or family members. If you own a shareholding in a publicly listed company realising or transferring its value is relatively easy, however with privately owned farms or businesses or for those with significant controlling interest in listed companies, realising and transferring value is a far different process.
Succession planning should start the day you commence your business and continues until the business no longer exists or you release your interest.
For these reasons we believe Succession planning is important for family businesses, small businesses, privately owned businesses or a significant controlling interest in publicly listed businesses. So no matter how you describe your business, succession is fundamental in determining the ‘capital value, worth, market price’ of your business, and therefore your and your family’s wealth.
In any economy, these ‘privately owned’ business interests collectively represent ‘big business’ and therefore succession planning is a process that should be taken seriously.
The Farm Protectors know that Succession plans come in all shapes and sizes and vary according to the complexity of families, the business and the goals that are developed. However, we believe that all succession processes should have the same range of considerations if they are to address all the critical issues and accordingly develop a succession plan that is effective and resilient.
We have developed and use a tried and proven approach to succession and developing your individual succession Plan. We outline a plan or a map that details how you will reach your individual goals and the timetable you might need to follow to achieve them. Its purpose is to help you keep focused on where you are heading and why. It also helps make sure others involved in the process do not lose sight of what is expected of them, and can look back and understand why certain choices were taken or decisions made. It is developed progressively with you in stages as you and your family and business move through the process.
We commence the process by considering a range of matters including Goals, Family, Wealth, Business and Legacy.
We believe that an effective succession plan will support a transfer of decision- making whilst also providing sensible safeguards and a good level of support for the new owner. It will also strengthen the separation between the business and the various family activities that are often integrated within the operating business.
The Farm Protectors assists in building an effective governance structure including:-
- a family charter that defines the relationship of the family with the businesses and how the two will interact.
- scheduled and formalised family meetings to allow the family to be briefed on what is happening in the business, to openly discuss the business from a family perspective and to allow a forum to address relevant family matters.
- the formation of a Family Council in larger families where 3rd generation and beyond are now actively involved in the family/business to bring an even greater degree of professionalism to the family/business dynamic.
- the formalisation, through both the Family Charter and meetings, of the dividend and entitlement policy for family members.