by Tony Vidler
Succession planning is simply about working out how to exit the business at your preferred time, in your preferred way, and hopefully at your preferred price.
Doing that successfully is quite a journey, and will involve significant thought and planning, and detailed execution. There are 6 distinct phases to an ideal business succession plan, and this article covers the first three in some detail.
The 6 steps of a full succession plan are:
1. Establish the Owners Objectives
2. Understanding Where The Value Is
3. Building & Maintaining Practice Value
4. Creating the Sale
5. Completing the Sale
6. Personal Planning & Legacy Issues
Establishing the Owners Objectives
At the very beginning of any succession planning you have to answer the essential questions of “what, when, who and how” as they establish the framework of what is trying to be achieved.
Understanding Where The Value Is
One of the key questions at the outset was understanding what it is you are selling – a business, an interest in a business, just an asset sale? It follows that once you have worked out what it is you are selling you need to understand what components add or create value within that. Considerations will include:
Building and Maintaining Practice Value
Having established a clear picture of what it is you are hoping to achieve, and how others would consider where value might lie within the business, it becomes somewhat easier to then focus upon the areas that can add the most to practice value, and therefore enhance the return from your succession planning. These might include:
For pure “asset sales”:
For entire “entity sales”:
The first three steps of succession planning are arguably the most difficult, in that they are focussed on understanding the objectives, the levers that drive value, and then building a strategy (or plan) around how to achieve the optimal value.
And that is only half of the battle!
In the next post I will work through the other 3 steps that are needed to create a complete succession plan for professional practices.0