Succession planning

Succession planning means preparing your business for change and there are a number of things to consider:

  • Business ownership transitions. Examples include family succession or management buyouts.
  • Leadership continuity. This ensures the incoming leadership is equipped with the skills and knowledge to operate the business. This demonstrates confidence and stability, which are important for staff, customers and suppliers.
  • Emergency succession planning. This ensures that during a crisis there is a clear process in place so everyone knows what to do and who is in charge, to eliminate confusion. To help you plan for an emergency event see Expect the unexpected section on our website.

Succession planning ensures your business continues to operate through expected or unexpected changes.

Why is succession planning important?

A lack of planning can put your business at significant risk.

If you don’t plan for staff or leadership changes, your business may face significant disruption and instability exposing it to operational and financial losses.

Taking time to put a clear plan in place helps reduce risk, provides certainty and ensures your business continues to run smoothly – even when things change.

The risks if you don't consider succession planning include:

  • a leadership vacuum or the wrong person taking on a critical role
  • loss of knowledge or essential skills
  • operational chaos and a drop in productivity
  • rushed decisions that result in a poor strategic direction
  • loss of confidence or reputation among staff, customers, stakeholders and suppliers
  • unnecessary staff turnover and a drop in morale
  • conflict between people if roles and responsibilities aren’t clear.

Your legal and financial obligations:

Succession planning isn’t just about choosing the right person to take over, it’s also about making sure the legal and financial details are sorted.

For business owners, this might include:

  • Updating your will, business agreements or power of attorney.
  • Reviewing or creating a buy-sell agreement that outlines what happens if you or a co-owner leave the business.
  • Planning for tax obligations, such as capital gains tax when transferring ownership.
  • Talking to your accountant, lawyer or financial advisor to make sure everything is set up properly.

A strong succession plan makes moving on easier and reduces the risk of the business operations being disrupted.

For advice on succession planning from experienced local business advisors contact the Tasmanian Business Advice Service or the New Business Support Service. Phone: 1800 440 026 or email ask@business.tas.gov.au

For a helpful step-by-step guide to succession planning and a practical template to download for free, check out the Australian Government’s business website.