There are several different exit strategies available to mortgage brokers – sell to family or friends, sell your book only, or sell to other shareholders. According to Succession Plus’s Craig West, one of the most lucrative is to sell the business to existing key staff. But how? Succession planning: step-by-step
Craig West
5 Secure funding Funding is not just the buyer’s problem. Young and upcoming successors tend to lack the necessary capital. One option for owners is to fund the purchase themselves. The business could use its overdraft facility to borrow money specifically to enable the purchaser to buy shares from the current stakeholders or to allow the new owners to sacrifice part of their salary to fund the purchase. 6 Smooth transition Allow sufficient time for the new owners to upskill across all areas of the business. Thoroughly documented systems, processes and procedures can help bridge the skills/experience gap. As well, clients need time to become comfortable with the change in ownership. 7 Expert tax advice There are tax benefits to implementing a proper succession plan. Getting an expert on board to help you develop your plan can help you realise all of the tax implications and benefits. 8 Communicate Providing staff with an abbreviated version of your succession plan and keeping them abreast of progress through regular meetings is a key component to acceptance. Staff need to know why the succession plan is being implemented, its key features, how it will affect them and what the benefits will be to current and new shareholders as well as staff. 9 Advice Gather a team of quality advisors to help you with succession planning. Members of your team could include a project manager, accountant, lawyer, insurance expert and business coach.
1 Develop a strategy The biggest mistake business owners make is not allowing enough time to plan or implement their exit strategy. Your strategy should also be constantly monitored and reviewed as your business matures. 2 Maximise the value of your business Identify where your business is positioned on the business spectrum – are you operating a boutique business, a scale-based business, or somewhere in-between? The competitive advantage for boutiques comes from offering a premium product or service, at a premium price, to a select clientele. The key growth strategy for boutique businesses is to further exploit this pricing advantage by becoming even more boutique – more premium and selective. Scale-based businesses, on the other hand, gain a competitive advantage through volume. The key growth strategy then is to increase volume – more clients and greater service. If your business is somewhere in-between, your goal is to gravitate to one of the spectrum or the other. 3 Choose your successors The most effective way to ensure a smooth transition of ownership is to identify and select the most suitable buyers. For small to medium- sized businesses, management buy-outs are a very effective sales strategy. Not only does this strategy make it possible to identify potential successors from within the company and transition the new owner into a central role over a long period of time, but it also gives the current owner certainty over the future of their business. In addition, employees are in a good position to see both the strengths and weaknesses of the business and already be fluent in the company’s culture and values. 4 Implement an equity matrix Because an ideal succession plan is a gradual transfer of ownership over a long period of time, it is important to ensure everyone is getting a ‘win’ at all stages. An equity matrix charts the process for transferring equity and responsibility for management of the company from current to new owners. Done properly, it ensures the value received by both parties is greater than the cost.
Source: Succession Plus – successionplus.com.au. For a more complete guide, contact Collins SBA on 1300 265 722
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