Challenge and consider changing your licensee
- published on 17/05/2012
- 4
The professional obligations of financial planners trump those of their employers and should guide their behaviour in dealing with practices or processes that ... [more]
Smooth succession all in the planning
- 2 February, 2011
- 1 comment
print
Tony Kabrovski
After a slowdown in transactions due to the global financial crisis (GFC), succession planning in 2011 will require financial planners and business owners to “redefine values and look at the business differently”, according to Tony Kabrovski, business services partner at HLB Mann Judd.
Kabrovski says the GFC was a key event that will continue to force organisations to improve their financial discipline.
“I think that’s probably one of the lessons I’ve learnt, coming out of the GFC: If you haven’t put together some kind of strategic plan or you’re using the same plan pre-GFC, then you’re destined for failure,” he says.
“Businesses have been acting quite well in terms of paying off all their debts and being in a position where they’re relatively financially stable but they’ve lost sight of the actual business itself.
“They don’t have the strategy in place, they don’t have a vision; there’s no real values that appear in their business.
“When you ask them, ‘What are your 12 month objectives? What are your three year objectives?’ they don’t know what they’re going to do tomorrow, let alone the next 12 months or three years.”
Information regarding stocks is an essential element of a successful business as overbuying could mean “they’re making profits but there’s no cash in the bank,” Kabrovski says.
“Are stock levels really low enough to require more stock or do you just keep getting more stock because you think that it looks good in the warehouse?”
A succession plan for any business needs to be in place for a smooth exit plan or transaction to future ownership, according to Simon James, corporate financial partner at HLB Mann Judd.
He says baby boomers have been forced to rethink their wishes, as their children don’t necessarily want to take over the family business.
“Some have realised it might be better leaving them money as opposed to a business,” James says.
According to Kabrovski, values are commonly overlooked in the businesses he’s worked with.
“The period after the GFC has seen a lot of [our] businesses either define or redefine their ambition, vision and values,” he says.
“Ask them why they are really in business and what they’re actually setting out to achieve.
“We’re finding more and more that helping business owners with their 12-month and three-year objectives are actually helping their business grow because they know where they want to get to and we work with them as to how to achieve their goals.”
James says there will be a high demand for succession planning in 2011.
“The amount of mid-60 [year olds] with businesses that we talk to who don’t want to work anymore [means] there is going to be more people very keen to move forward,” he says.
“There are lots of businesses that can take advantage of some of these opportunities out there in terms of taking on new niches and new sectors, if they’re willing to take that risk.
“So I think the equilibrium, the balance, is going to shift.”
Going forward, HLB Mann Judd is expecting a positive year.
“There is definitely going to be a lot more transactions going through this year because people have got money and people are looking to sell,” James says.
James’ point is a good one – the emphasis on planning for growth, articulating and executing the right strategy, and extracting (or being able to extrct) more value are all important building blocks in the succesion maze.
However, what is missing is any pointers to an important question: why is it that so many business owners either don’t consider what they might do in relation to their succession? Or, why do they not enagage with the concept and execute their succession plans?
My doctoral reserch clearly suggests that there is a range of complexities (behavioural/emotional/psychological/relational) which raise significant barriers to a smoothe transition and exit. For many, the easiest response to those complexities is to “bury their heads”.
I applaud the efforts of James and others to bring succession to the forefront. But I’d challenge the notion that succesion is simply an instrumental process which requires a vision and the execution of a plan.
In adition, there is a raft of sociological and demographic evidence emerging which might, in fact, put rest to the idea tht baby boomers are rushing to the exit doors and into retirement.
Succesion is an issue which demands a range of options – including the retention of ownership and a platform which can be built around personal and business transition and change.
Bill Hovey – CEO, Linchpin Succession Management and Doctoral Scholar (Macquarie Graduate School of Management)