DIY accounting software can have a major pitfall – here’s how to avoid it
The DIY Kiwi mindset and ease of use that comes with accounting software has led to many business owners...
One is that it can typically be wrapped up in months. The Ministry of Business, Innovation and Employment recommends anything from two to five years, depending on the type of succession and all it entails. Another is assuming that your family and employees will share your feelings and expectations around succession, but your preferred outcomes may be different so there’s no time like now to start your planning and have key discussions. But what does that look like?
Firstly you’ll need to consider your goals, says Matt. Do you want your children to take over the business? Are you aiming for it to finance your retirement? Do you want a continuing business legacy? Your options include:
“Once that’s established, you should get feedback from relevant family and team members, your intended successor if you have someone in mind, and business advisors such as your accountant, banker and lawyer,” says Matt.
It’s important to have direct and honest conversations, taking their thoughts and feelings into account. Things to consider include:
Document your plan and share it with the key people. This is where it’s helpful to ask your business advisor if you’ve taken all key things into account. That includes…
If you intend to sell your business, you’ll need to make it an attractive proposition for buyers. That includes consideration of your organisational structure, a business valuation, documenting operational processes, tidying up your balance sheet, financial forecasting, tax planning, sale preparation and more. Also, don’t forget to update your will and insurance.
Consider whether they need additional experience and training, and whether you’re the right person to provide that. “For example, if you’re grooming an existing employee for ownership, they might be really good at their job, but need external training in staff management or business acumen,” says Matt.
“You should also consider whether they are the right fit for your customers and employees. That ties into whether their values, communication and leadership style align with your business culture and practices.”
It’s also important to understand that the new leader will have their own management style and way of operating. Matt says many business owners are accustomed to doing things a particular way and find it hard to let go, but it’s important to step back and relinquish control.
If your succession plan won’t come into being for some time and the new owner-in-waiting is an employee or family member, you can potentially offer a small equity share to help with engagement and lock them in to the long-term plan.
A key thing in succession planning is mitigating the effects so that the handover and aftermath go as smoothly as possible for your employees and clients or customers. “For example, think about introducing your customers to the new owner well before they take over, so they get to know that person and are comfortable dealing with them,” says Matt.
Sometimes new owners want to change a lot of things. They go in with a lot of energy and that can be disruptive to customers and employees. A good idea, if changes might have far-reaching effects, is to have a bedding-in period to become familiar with the business and understand why things are done a particular way, and make sure any changes are well thought out and will be accepted.
DISCLAIMER No liability is assumed by Baker Tilly Staples Rodway for any losses suffered by any person relying directly or indirectly upon any article within this website. It is recommended that you consult your advisor before acting on this information.
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