INTHEBLACK October 2021 - Magazine - Page 65
Above: Amanda Greer (centre) with
Stainless Steel Wire and Mesh’s
marketing manager Tory Greer (left)
and managing director Andrew Greer.
Once a business reaches a turnover of
A$5 million, there should be a board of directors
in place, says West. Typically, the reason a business
does not have one is because it has grown
significantly without adapting its governance.
“As you get bigger, it becomes more difficult
and more messy,” he says. This is one reason that
accountants are increasingly getting involved in
small business succession planning. Brought in to
get the accounts cleaned up, they can make sure
the owner is paying themselves a market salary, get
rid of one-off payments and separate out personal
expenses from the business account.
“You can’t rush that. If you leave succession too
late, you will sell, but you won’t get the same amount
of money or an easy transaction,” says West.
EMERGENCY MEASURES
Unfortunately, many clients that West and Jones
meet need an urgent sale. Someone has passed
away, suffered a disability or divorce, there may
be partnership disputes – a whole range of things
may have happened, and there may not even be
emergency plans in place.
“Protecting the value of the business becomes
a priority, and emergency planning will at
“PROTECTING
THE VALUE OF
THE BUSINESS
BECOMES A
PRIORITY, AND
EMERGENCY
PLANNING WILL
AT LEAST COVER
SUCH BASICS AS
HAVING A WILL
AND POWER OF
ATTORNEY
PREPARED,
PERSONAL
INSURANCE AND
DIRECTORS IN
PLACE.”
STEPHEN JONES,
SUCCESSION PLUS
least cover such basics as having a will and power of
attorney prepared, personal insurance and directors in
place,” says Jones. Doing things in a rush is inevitably
going to cost more, and money may need to be spent
on external advice and support.
“For instance, clients who don’t have marketing set
up and lack a good website or internet presence will
need to do that quickly, as buyers hate that,” says West,
who compares the effort owners put into getting their
homes ready for sale to the lack of preparation for
making their business market-ready.
LEAVING A LEGACY
Business owners who care about their legacy have an
opportunity to put steps in place to honour it as part
of their exit strategy.
“Conflict can arise, however, when an owner wants
to leave a legacy by passing on the business to their
children, but they need to extract money out of the
business for their super. If they sell to an external party,
they get the equity, but their family won’t have the
legacy asset,” says Jones.
Legacy is not always about tangible things, like
money or the business. Sometimes it’s about brand
and reputation, says West.
“Owners feel an intimate connection to their
business and want to make sure the business stays
successful after it is sold. Or, they want to ensure that
employees and customers get looked after, and new
owners don’t do anything they don’t like.”
This is another reason to work through succession
planning gradually, says West.
Employee share plans have become popular as
a legacy tool, but they take time to set up and to
allow employees to secure the funds to buy into the
company.
West points out that, in Australia, many baby
boomers are already wealthy. “It is estimated that over
the next decade the retirement of family business
owners will see the transfer of approximately
A$1.6 trillion in wealth. That surely must make
succession planning one of the most significant
issues facing SME owners today.”
intheblack.com October 2021 65