The benefits of having a succession plan

The Small Business Company

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Before embarking on the process of business succession, it is essential that you understand your motivations for the process and what you hope to get out of it. Without a clear view of the intended outcome and the benefits of the process, it is unlikely that your objectives will be met. To help you understand your priorities and set objectives, ask yourself the following questions:
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    * Do I want an ongoing management involvement in the business?
    * Do I want an ongoing financial involvement in the business?
    * Have I determined what’s really important to me? For example, do I wish to maximise the value I receive for my business, or are other issues (like safeguarding my employees) more important ?
    * Are there other motivating factors for me? Do I want the business to retain its name and identity following my exit. Is it important that my business retains its independence and/or kiwi ownership?

Understanding the answers to these and other questions will help you to be clear about your priorities and lead you to choose the most appropriate method of exiting the business.

While it is important to have a clear view of your objectives, it is also important to be clear about the priorities of your business. Having a clear view of your future strategy for the business and the critical success factors will impact on your chosen method of succession and exit. Questions you should ask yourself include:

    * What are the opportunities available to my business and what is the strategy for taking advantage of them?
    * What are the critical success factors in determining the future growth of my business?
    * Does my business have all the necessary managerial expertise required to be successful in the future?
    * Does the business have an appropriate capital structure and access to further funding to enable it to take advantage of the future opportunities?

Answering these questions requires a clear view of the future strategic direction of the business. If the future strategy requires significant changes to the current business model, the impact of these changes needs to be factored into your succession and exit planning.

For example, if your business has, to date, largely been focused on the New Zealand domestic market and your strategy dictates that it must exploit export markets to grow, this will have significant implications for the managerial and capital requirements of your business and hence, your succession and exit strategy. You may decide that the capital, resources and 'know how' of an existing overseas company are the best route for exploiting your company’s export potential. Alternatively, you may decide that a stock market flotation provides the best option for raising the necessary capital and attracting the appropriate managerial talent. Whatever your decision, it is only by a clear understanding of your priorities and your business’s priorities that you can choose the succession and exit options that best meet your needs.

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