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How to protect your business with succession planning

WRITTEN BYJames Price | JPAbusiness

Family business

Succession planning is about protecting your business against the risk of failure should key people - including yourself - leave.

People often confuse the practice of business ‘succession planning’ with ‘retirement planning’. They are, of course, very different concepts.

Succession planning is a valuable activity for any business, at any stage, regardless of whether the owner is considering retiring, selling or staying with the business for many years to come.

Why do I need a succession plan?

Succession planning is about creating a dependable and reliable back-up system for your business.

The goal is to protect the business from the removal of key individuals that impact and operate the business, including yourself.

If you have future-proofed your business by having a well thought out and implemented succession strategy, the business should thrive even if you’re not intimately involved in the day-to-day details, and the market should reward you when it does come time to exit.


Client case study

To show how succession planning works in practice, I’ll use an example from one of our interactions with a prospective client.

This proposal was drawn up by JPAbusiness following a two-hour meeting with the business owner, as a means of meeting their specific business needs relating to succession. We have omitted and altered some facts, where necessary, to maintain their privacy.

JPAbusiness Succession Planning Proposal – Business X

Business X background:

  • Business X has been established for 25 years. It’s a successful family business enterprise with a strong brand and offering focused on the building products and industrial services sector.
  • Owner is open to continuing ownership for at least the next five years.
  • Owner would contemplate selling should the right buyer be identified, or continuing to own the business for an indefinite period should this option make good sense, providing there are achievable options to exit available.

Owner’s strategic succession objectives:

  • A desire to be less tied to the day-to-day operational management, and have the business less reliant on you for its performance, while still delivering a solid risk/return for you as the owner
  • Be in a position within 3–6 months where you are able to give a high priority to your (out-of-business) investment and other plans (e.g. commercial and industrial real estate investments)
  • Reduce your time spent in the business from full-time to 1–1.5 days a week
  • Be in a position over the next 5+ years to ensure the business is an attractive saleable proposition to market participants that may be interested in a strategic acquisition, as a means of optimising business value on exit (and also optimising going concern value over this period, regardless of a sale transaction).

JPAbusiness recommendations:

  • Undertake a comprehensive Market Appraisal Assessment of the business, as it is today. This Assessment will provide a ‘baseline’ for you to measure progress on the business as actions and changes are made.
  • The Assessment will be a market external independent view on:
    • value and the contributors to value
    • detractors to value
    • likely dynamics, issues and trade-offs to consider in retaining and building further value over time.
  • The Market Appraisal Assessment will involve the following:
    • a review of key information relating to the business, including financial performance, sales, suppliers, people, systems and other relevant business data
    • external review of market dynamics and competitive factors
    • internal analysis and review against market and other comparable businesses
    • an 8–10 page report including our Assessment of a valuation range
    • specific recommendations on the items and issues to consider to protect, retain and enhance value
    • specific recommendations on the items and issues to consider to achieve your specific strategic objectives, outlined above
    • a review session with you to review our draft report, and pressure-test our views and analysis, and related strategic advice on options and actions to progress.
  • Following the Market Appraisal Assessment process, JPAbusiness could assist in implementing the strategies and actions recommended. 


When should I start planning?

Succession planning should begin the minute you start up a business, whether you buy it or start it from scratch.

If you’re thinking about succession it’s critical to put yourself in the shoes of a potential purchaser at any time during your business’s life, even if you’re not thinking about selling, and ask:

  • If someone paid me to hand this business over to them, what would it be like for them?
  • How easy would it be to take over this business and run it?
  • Are the systems and processes clear and available, or are they a secret?

If you would like advice or support to create a succession plan for your business, contact the team at JPAbusiness on 02 6360 0360 or 02 9893 1803 for a confidential initial discussion. 

Succession planning - how to create a back-up cover 2022
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Succession planning for small to mid-sized businesses

Succession planning isn't just for older people - it should begin the minute you start up a business. It's about protecting your business against the risk of failure should key people - including yourself - leave.

About James Price | JPAbusiness James Price has over 30 years’ experience in providing strategic, commercial and financial advice to Australian and international business clients. James’ blogs provide business advice for aspiring and current small to mid-sized business owners, operators and managers.