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Exit stage left - successful succession planning for small business owners

  • Friday, May 04, 2018
  • Sandy Dunshea

If you are expecting to retire in the next five to ten years and want a smooth business exit that achieves maximum value for yourself and the business, you need a plan.

There are many options for transitioning out of your business, and the longer you leave it, the more difficult it will become. Don’t put your business or personal financial situation at risk.

It is estimated that four out of ten Australian small businesses do not have a succession plan in place.[1] Further, only 20% of family-owned businesses have a succession plan for the CEO, even though more than 80% of business owners are planning to retire in the next ten years.[2]

Significant time is required for successful succession planning, a fact that is exacerbated when you take into account that the average age of business owners is increasing, now at 58 years of age, with 25% of owners aged over 65.[3]

With increasing numbers of business owners approaching retirement age, it’s more important than ever to consider the time required for effective succession planning, with a focus on their retirement needs, and the longer-term fate of their business. Without a well-structured and well-considered succession plan, you could be leaving yourself short in terms of the value of your business and your own personal retirement savings.

Options for exiting your business

There are many options for exiting your business and/or transitioning to retirement, and for all of them, the more time you give yourself to plan, the better the financial outcomes will usually be. 

#1 Selling your business externally – If you are looking for the optimal financial outcome from the sale of your business, you will need to have your accounts in good working order and long-term contracts in place, so you can make the most of your business value and allow prospective buyers to do their due diligence. It will be beneficial to undertake a professional business valuation when your business is running at peak efficiency. As a result of the valuation, you may need time to implement improvements to help meet efficiency goals or production outcomes with the aim of achieving a more favourable sale price. In our experience, it can take years to make your small business sale ready, find a buyer and complete a successful sale.

#2 Transitioning to a family member or business partner – In this case, you will need time to put in place the comprehensive documentation required. This will involve understanding tax and legal options, their implications and general requirements for all parties involved. The outcomes you may need to consider include: the transfer of management responsibility; your own retirement plans and required funding; understanding the advantages and disadvantages of different business structures and associated tax and legal implications; and remuneration and eventual ownership for family members.

#3 Key employee shareholder plans – Transitioning your business to a key employee can take many years. While this can be a great strategy for retaining key staff, often valuing the business and shareholding will require negotiation and time. Creating funding options for the incoming shareholder using profits and personal savings or business loans can be complex and it will usually take a number of years for the business ownership to transition to the nominated employee, so planning early is important if this is the option you are looking to use.

#4 Ceasing operations - Selling business assets to release equity – If you are planning to use the sale of business assets as part of your retirement plan, it’s still important to plan early. Asset sales may result in different tax implications, depending on where the assets are held and/or if they are jointly owned. It’s important to seek professional tax advice to understand the advantages and disadvantages of assets held in different structures. There are also strict rules and caps for contributing funds into super, which means it can be difficult to contribute large sums into super over a short period of time. It’s therefore important to understand how the funds generated from asset sales will fit with your overall superannuation strategy and financial and retirement goals.

Start the conversation today

If you want to get the most from your transition out of the business, it’s important to seek professional advice early. Succession planning is complex and can take years, and it’s important to know that you won’t be able to do it on your own.

We have access to an experienced and trusted team of aligned advisers including accountants, solicitors, business valuers and risk advisers to help plan a succession plan for your personal and business circumstances.

For more information about succession planning or to set up an appointment, please contact Sandy Dunshea (02) 6884 2222 or email


Sandy Dunshea is a financial adviser with Fortnum Dubbo. Fortnum Dubbo and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. 

The information (including taxation) contained within this document does not consider your personal circumstances and is of a general nature only - unless otherwise stated. Fortnum Dubbo strongly suggests that you should not act on it without first obtaining professional advice specific to your circumstances. 

This publication cannot be reproduced in any form without the express written consent of the author.

Fortnum Dubbo and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306 trading as Fortnum Financial Advisers.

The information contained within this website does not consider your personal circumstances and is of a general nature only. You should not act on it without first obtaining professional financial advice specific to your circumstances. This website holds information for Australian Residents only.

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