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By Mike Sweeney, Principal. 


When picking topics for articles, we always attempt to find subjects which are contemporary.  There seems to be no more contemporary subject than succession planning.  Whether it’s the changeover of Qantas CEO, Lachlan Murdoch replacing his father as Chair of News Corp, the drama of the Roy family in the aptly named HBO series ‘Succession’ or even the power vacuum in a criminal organisation left by a kingpin meeting their untimely demise, every organisation must deal with the challenges of succession planning eventually.


We are seeing more activity in this space due to the business affects of COVID, with the reason being two-fold.  Firstly, businesses who were looking to make a fundamental strategic change over the last two or three years put that on hold as they tackled the challenges of lock-downs and restrictions.  Secondly, business operators fatigued by the extra pressure of trading in a COVID environment have brought forward their retirement plans.


Traditionally the solution was “one-out, one-in” where the retiring Chair/CEO/Owner was replaced by someone able to fill the position.  Nowadays this is less likely as rising house prices tie up capital of potential successors and changing ambitions limit candidates who want to step into the role.  As a result, the solution often requires multiple successors to fill the many facets of the role of the retiring operator.

This may include:


The retiring operator may be expecting to use the sale of the business to fund their retirement – this is especially the case for small businesses.  There are several methodologies that can be used to value a business, but in the end the value is what someone else is willing to pay for it.  A capital successor must then have access to the funds to settle on the purchase of the business.

Management/Corporate Memory

Business processes evolve over time like any other activity, but if that process is not documented it requires the knowledge/memory of the business operator to ensure the smooth running of the business.  To prepare for retirement of the corporate knowledge holder may require a long lead time while processes and procedures are streamlined and well documented.  A management successor must have the time and experience to document key activities and any nuances of business operations.

Technical Skill/Experience

A detailed skills assessment of staff (including the retiring operator) will highlight gaps in the skills of the management team post-retirement.  Where the skills can be learned, a study program can be implemented to obtain the required knowledge.  Where the skills are more practical and come with experience, a training program with access to the mentor may be required.  A technical skill successor must have the time and interest to study the missing skills.


Business is all about relationships – relationships with customers, suppliers, staff etc.  Where the relationship is with a particular person rather than the business itself, careful planning and a “handover” process must be undertaken so those key relationships can be fostered past the retirement date.  Nothing is going to immediately replace the trust and understanding built over years of business exchange, but with the recommendation and support of the retiring operator, a good head start in the process can be achieved.  A relationship successor must be open to building connections with business contacts.


Not every business is going to be in a position to have all these elements completely worked through and compromise may have to be made to see a successful transition.


Examples of succession programs we have assisted with are:

Management Buy Out

A sole operator had developed their business over many years to become of the leading suppliers in their market.  The decision was then made to pass the company on to the senior management team (sometimes referred to as a Management Buy Out or MBO).  The management, technical skill and relationship elements of the succession plan were all taken care of through the long-term involvement of the two senior managers in the company – but capital would be a problem.  After assisting the client with a valuation of the business, the decision was made to vendor finance the sale – meaning the retiring business operator would be paid the sale price of the business over a number of years.

Generational Change

Like a lot of small businesses, this one became a family affair with the children being primed to take over from their parents.  Capital was no issue (the business was being gifted) and with a long lead in time, management and technical skill elements were taken care of.  The relationship element took the longest to secure.  The business had been operating for more than 30 years and the parents built a solid reputation and were able to call on their relationship with customers and suppliers in emergencies.  To correct this the business immediately started to negotiate as a team – with at least one parent and child attending all meetings.  Over two years the transition to the children taking the lead was made, and in the third year the process was completed.


A well thought out succession plan can assist with making the transition as seamless as possible and while we all hope to dictate the terms of our retirements, sometimes factors outside our control impact these timelines.  As a result, it is never too early to have an exit strategy/succession plan in place.

If you require assistance with your plans, please contact our office.


The information provided in this article is general in nature and does not take into account any person or entity's particular financial situation or needs. Please contact us for advice specific to your circumstances.


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