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Health Industry
Succession planning why the right time is now
By Danny Haydon, Chairman/Principal
26 May 2022
You’ve worked hard, built a successful business, and are reaping the rewards financially. But what of the future? How will you maximise the value of the business when it’s time to move on? That’s where succession plans play a vital role.
Running a successful health business can be all-consuming. However, it pays to keep an eye on what lies over the horizon.
Succession plans are a critical feature of a strong, forward-facing business. Failing to address a handover of leadership or ownership can bring severe impacts – anything from a deterioration of the business or personal wealth, through to family conflict.
Despite these risks, succession planning is woefully neglected across Australian businesses.
One in two businesses have no plan
An industry survey1 found 54% of small to medium family businesses have no documented succession plans in place. Among businesses where leadership succession is on the cards within five years, only 26% have identified who ownership would pass to, and just 27% have a retirement plan for the CEO or managing director.
It’s common for business owners to have a vision of what they would like to see happen with the business ‘someday’. The archilles heel tends to be making hard and fast plans to make that vision a reality. Yes, succession planning can mean addressing personal issues around when you plan to retire – and while this can call for some soul searching, the reality is that no leader stays at the helm forever.
Add in the possibility of life’s curve balls – ill health for example, could force you to exit the business prematurely, and the need for succession planning becomes doubly important.
What does succession planning involve?
Effective succession planning spans multiple disciplines. Among the issues to address, it is important to consider:
- Who you have identified as a successor,
- How you can engage business partners or family members with your succession plans to find a solution that works for everyone,
- How assets can be transferred (if necessary) in a tax effective way,
- An appropriate business structure suitable to your succession plans,
- Whether you will remain engaged in the business – or if you depend on the practice for retirement cashflow, and
- How and when the business will be valued if it needs to be sold as part of your plans.
With so many aspects and complexities to weigh up, succession planning calls for professional advice.
"Planning ahead means not leaving the future of your practice - or your wealth, to chance. It can provide certainty for you, your family, your business partners and your staff."
When to create succession plans?
In a perfect world, voluntary succession plans could be prepared ahead of a known retirement date.
But the world is not perfect.
The unexpected can happen that derails even the best laid plans. Involuntary succession can be the result of the forced departure of a business owner due to serious injury or illness, bankruptcy or even death.
The upshot is that the right time to put succession plans in place is now.
Succession isn’t a ‘flick of the switch’ process. It needs to be managed from both a practical – and emotional perspective, and this can take time.
Planning ahead means not leaving the future of your practice – or your wealth, to chance. It can provide certainty for you, your family, your business partners and your staff. It also means being able to confidently hand your patients over to your successor.
Something that is often overlooked is that having a succession plan in place can help to
maximise the value of your business. This matters for you and your family, and it is also a critical aspect of managing the relationships you have with business partners. On that score, it’s worth pointing out that every partner in a practice – not just those approaching retirement, should have succession plans in place.
What’s in it for you?
In the daily cut and thrust of a busy medical practice, succession planning can be put on the back burner as something you’ll get around to eventually. But it pays to act now.
The team at Brentnalls Health can help you maximise the value of your business, and either help you transition to the next generation of owners – possibly family members, or prepare it for sale when you’re ready.
The key is to maximise the value of your business, mentor your successors, develop clear systems and processes within the business for successors to follow and give thought to the need to restructure entities if necessary.
It can sound like a tall order but with professional support it can be done efficiently and without disruption to the business. The reward is peace of mind that you can enjoy the retirement you deserve, while the business you have worked hard to build continues to thrive into the future.
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1. https://assets.kpmg/content/dam/kpmg/au/pdf/2018/family-business-survey-2018-report.pdf
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Disclaimer
The information provided in this article does not constitute advice. The information is of a general nature only and does not take into account your individual financial situation. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you contact Brentnalls SA before making any decision to discuss your particular requirements or circumstances.
