Finance: Fail to plan, plan to fail

I am meant to write a column every week, but because it always goes to the end of my to-do list, all I can think about is who's going to write them for me and who might take over when I'm dead.

This brings me to this week's topic: Succession planning.

I was reading a report this afternoon that showed that one in every 10 businesses had a succession plan. That means the other nine either don't plan on moving on any time in the future, aren't worried about what will happen to the business, or expect key staff to live forever and continue running their businesses as they are.

But succession is one of those things that takes time to work through.

The point when you need to move on is not the time to be making big decisions. Planning for the future needs some clear thinking space and some professional advice, such as from a lawyer or accountant and maybe even your insurance broker.

Some of the benefits of succession planning:

1. Someone continues the legacy you have created, running the business you have built up over the years

2. You get to plan for your retirement and possibly look forward to the handsome sum you may have negotiated for a potential buyout by an up-and-coming businessperson

3. Everyone (by everyone I mean everyone who needs to know) knows what's happening in the event of your planned retirement or untimely death or disability.

4. It gets you thinking about not being there to run your business, which is the difference between a business and a job.

Get it in writing, and make it legal. There's no use having a plan in your head: Write it down - cue lawyer - you will also need to discuss wills and possibly a trust.

Get some insurance for key people, including yourself. Make sure you're protected, this is where the insurance broker comes in handy.

Does your current legal structure suit a succession plan? A company may be better as you can transfer shares gradually.

Get a valuation of your business to see what it's worth, your accountant will be able to help you here. Remember these transactions need to take place at arm's length, even more so if there are dealings with family members who may be looking after assets held in trust for other beneficiaries.

Keep an eye out for key stars in your business, consider shares to those employees - they may be the successor you've been looking for.

Waiting too long to take these steps can mean that succession may be out of the financial reach of the successor. I've seen this happen with farms as land values have increased so much over the years.