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What Is Business Succession Planning And How To Do It Right

What is Business Succession Planning and How to Do It Right

Prioritising growth and expansion, and not planning for the inevitable transition out of the business, can create significant risks for a business. This can lead to uncertainty about its future, potential loss of value, and challenges in preserving the owner’s legacy.

At Central Coast Financial Planning Group, we specialise in providing effective succession planning strategies for entrepreneurs, ensuring a smooth transition of ownership, and maximising their business value and preserving their legacy for future generations.

What is Business Succession Planning?

Succession planning for a business involves preparing for the transfer of ownership and management of control of a business, ensuring its continuity and success after the current owner departs. In Australia, where family businesses are prevalent, an effective succession plan involves deciding who will take over, when, and how.

Types of Transitions 

There are various types of business transitions, each requiring tailored business succession planning strategies that consider talent management, development for leadership positions, legal agreements, tax implications, and finances.

Importance of having a succession plan in place

Retirement: Retirement planning for business owners involves identifying and preparing a successor to take over the business, ensuring a seamless transition and continuity of business operations.

Family Transfer: Transferring ownership within the family requires addressing family dynamics, preparing the next generation, and establishing clear guidelines for the transfer process.

Sale: Selling the business involves valuing the company accurately, identifying potential buyers, and finalising legal agreements to facilitate a smooth transfer of ownership.

Unexpected Events: Planning for unexpected events like illness or death necessitates having contingency plans in place, ensuring the business can continue operating without disruptions.

Why Succession Planning is Crucial for Australian Business Owners

Succession planning means ensuring the continuity and long-term success of businesses by identifying and developing individuals who can fill critical positions and assume key leadership roles within the organisation.

Protecting Business Value 

A robust succession plan ensures the owners’ hard work is maximised by developing future leaders, while a rushed exit can significantly lower the business’s value.

Mr. Smith grooms his daughter Sarah to replace him in their family business. Sarah is well-prepared to lead the company and ensure its success, continuity, and value.

In a rushed exit scenario, Mr. Smith’s untimely sickness causes disruptions and loss of key talent and knowledge. Having an inadequate successor may lower productivity, business relationships, and value.

Smooth Continuity 

Succession planning for a business integrates developing talent pipelines with strategic goals, facilitating knowledge transfer and reducing risks from sudden leadership changes. 

In the event of an unexpected CEO resignation, a company with a solid business succession plan can quickly promote a qualified internal candidate groomed for the role.

The succession plan boosts employee engagement and retention by providing clear career paths and growth opportunities. It ensures consistent service and product quality, maintaining customer trust and satisfaction.

Family Harmony 

A proactive approach to succession planning may help families avoid conflict by defining key positions, and clear rules, duties, and expectations. 

John Smith includes his children Jane and Michael in succession planning before retiring. John advocates fairness and transparency for equal children’s input during family meetings about the business’s future. Jane is the CEO of strategic planning and marketing, while Michael is the COO of operations and finance.

John ensures family harmony by meeting regularly to evaluate business performance, resolve conflicts, and involve Jane and Michael in decision-making.

Tax Efficiency 

Succession planning ensures wealth management for successful business exits, including minimising taxes and increasing company value. Accountants and financial planners play an important role in strategic planning throughout transitions.

For example, businesses can enhance tax efficiency by collaborating with accountants, understanding timing decisions, utilising deductions and concessions, and strategically structuring or restructuring their business.

How to Do Succession Planning Right

Effective succession planning focuses on key steps that ensure a smooth transfer of ownership and future leadership transitions. Each step plays a vital role in preparing for the future and safeguarding the continuity and prosperity of the business.


Step 1: Start Early (and Honestly) 

A succession plan needs to be in place long before one is nearing retirement age. 

Starting early and being honest is essential to the succession planning process. This long-term process requires careful consideration of personal and business goals.

Identify your personal and business objectives for the succession plan to determine the appropriate timeline and transition approach.

Step 2: Build a Team of Experts 

A successful business succession plan requires a team of key people, including financial planners, attorneys, and accountants. Each plays a crucial role in ensuring a smooth transition.

A certified financial planner focuses on creating a comprehensive financial plan that aligns with your personal and business goals.

An attorney provides legal expertise to ensure the succession plan complies with all legal requirements and protects your interests.

An accountant focuses on financial matters, ensuring tax efficiency and financial stability during the transition.

Step 3: Business Valuation

Business valuation is vital in succession plans. It considers factors like earnings, assets, management structure, projected earnings, share price, revenue, and market timing.

An accurate valuation is necessary for determining a fair selling price, financing transitions, tax planning, and ensuring equitable asset distribution in family-owned businesses.

An experienced valuation professional is essential for accurate, unbiased, and credible valuations. They can identify and quantify company-specific value drivers to boost value and ensure fair arrangements for stakeholders throughout a business transition.

Step 4: Choose and Groom Successors 

Choosing and grooming successors involves evaluating internal and external candidates to ensure the best fit for the organisation’s future.

Internal candidates are current employees with potential for future leadership roles, while external candidates bring fresh perspectives and ideas, fostering growth and innovation within the organisation.

Whether you choose internal or external candidates, skills training is crucial to your business succession planning process. It prepares candidates to fill key roles and develops soft skills for leadership competencies to ensure business continuity and smooth transition.

Step 5: Legal and Financial Structure

Succession planning requires careful consideration of agreements, tax planning, and trusts. Seeking tailored advice from legal experts and financial advisers can ensure a successful ownership transition.

Clear and Comprehensive Agreements, including buy-sell, cross-purchase, and shareholder agreements, are vital for defining ownership transfer terms in various scenarios, such as retirement, death, or disability.

Tax Planning is paramount for businesses to maximise value and minimise burden. It involves estate freezes, trusts, rollovers, and consulting tax specialists for efficient strategies.

Trusts are crucial tools in succession planning, especially in family-owned businesses. They enable asset distribution, tax reduction, and protection of family interests.

Your Financial Planner as Your Succession Partner

A financial planner’s expertise ensures a smooth business succession process by guiding financial concerns like valuation, deal structure, and tax implications.

The value of financial advice

Financial planners assist families in making complex decisions by promoting open communication and addressing concerns, ensuring succession plans align with business and family goals.

Regularly reviewing and updating a succession plan maintains its relevance and effectiveness in the face of changes in the business environment, goals, or potential successors. A financial planner can help businesses prepare for possible challenges or opportunities by assisting in this process.


An owner’s financial well-being depends on a seamless business exit that maximises value and ensures financial security. Business succession planning is a multifaceted process that requires careful consideration of valuation, deal structure, and tax implications.

Business owners should obtain personalised financial advice through financial planning services to ensure an effective succession planning strategy.

Central Coast Financial Planning Group offers personalised succession planning services, assisting owners in coordinating their financial objectives with succession planning goals for a smooth and profitable exit.

Call us or book online to secure your first appointment with an expert financial adviser today and get started! 

Know more about our services with real stories of successful business exits



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