Archive for 'Business'
Are you an SME who has been impacted economically by COVID-19, and who could use financial assistance to get back on their feet?
The SME Recovery Loan Scheme has been extended to 30 June 2022 with a reduced Government guarantee of 50 per cent. This is known as the 2022 Scheme expansion, where loans will be available from 1 January 2022 at the new Government guarantee.
Earlier this year (April 2021), the Government announced the SME Recovery Loan Scheme (also known as the Scheme), which was designed to support economic recovery and provide continued assistance to small and medium enterprises dealing with the economic impacts of the coronavirus pandemic.
The Scheme was initially slated to be available from 1 April 2021 through to 31 December 2021 at a Government guarantee of 80 per cent of the loan amount.
The scheme is open to small and medium-sized businesses with up to $250 million turnover including self-employed and non-profits. The Scheme has been open to (so far) eligible SMEs that were:
- The recipient of a JobKeeper payment between 4 January 2021 and 28 March 2021 (only approved under this eligibility prior to 1 October 2021)
- Affected by the floods in eligible LGAs in March 2021 (only approved under this eligibility criteria prior to 1 January 2022
- Adversely economically affected by COVID-19 (can only be approved under this eligibility criteria prior to the Scheme Expansion Date, 1 October 2021).
These loans that are issued under the Scheme are able to be used to refinance existing loans, or for a broad range of business purposes, including to support investment. They cannot be used to:
- Purchase residential property
- Purchase financial products
- Lend to an associated entity, or
- Lease, rent, hire or hire purchase existing assets that are more than halfway into their effective life.
These loans may be used to refinance any pre-existing debt of an eligible borrower, including those from the SME Guarantee Scheme.
Participating lenders are offering guaranteed loans on the following terms under the SME Recovery Loan Scheme (2022 Scheme expansion):
- the Government guarantee will be 50% of the loan amount
- the expanded Scheme will not be available for loans to flood-affected SMEs that are not adversely economically affected by COVID‑19
- the expanded Scheme will commence on 1 January 2022 and end on 30 June 2022.
- lenders are allowed to offer borrowers a repayment holiday of up to 24 months
- loans can be used for a broad range of business purposes, including investment support
- loans may be used to refinance any pre‑existing debt of an eligible borrower, including those from the SME Guarantee Scheme
- borrowers can access up to $5 million in total, in addition to the Phase 1 and Phase 2 loan limits
- loans are for terms of up to 10 years, with an optional repayment holiday period
- loans can be either unsecured or secured (excluding residential property)
- the interest rate on loans will be determined by lenders but will be capped at around 7.5 per cent, with some flexibility for interest rates on variable rate loans to increase if market interest rates rise over time
Loans that are backed by the scheme will be available through participating commercial lenders. The decisions to extend credit and the management of the loan remains with the lender.
The SME Recovery Loan Scheme may be a viable option for your business if it has been impacted by financial hardship. If you would like to know more about this scheme, you can begin that conversation with us or a participating lender.
From 1 November 2021, minimum wages in 21 awards were increased. If you are not paying your employees this new rate of pay, you may find yourself facing significant penalties for failure to comply with the Fair Work Ombudsman. This increase is to be applied to anyone who is paid the minimum award wages or the national minimum wages.
As an employer of workers, you must pay them a fair wage according to the award that their profession exists under. That wage must meet the minimum wage expectations for the award, which is the minimum amount an employee can be paid for the work that they’re doing. Employees may be paid more than that wage, but the bare minimum that they can be paid is set out in the awards and as a part of the national minimum wage base rate.
The national minimum wage was increased from $19.84 per hour to $20.33 per hour, or 772.60 per week (increased from $753.80). This increase should have applied from the first full pay period starting on or after 1 July 2021. In addition, employees who are covered by awards should also have had their base rates increased by 2.5 per cent, though these increases may begin on different dates for different groups of awards.
Most award wage increases applied from 1 July 2021, though there were 21 awards where the Fair Work Commission deemed there to be exceptional circumstances in place that would affect the increase. Those 21 awards were increased from 1 November 2021, and include:
- Pilots Award
- Cabin Crew Award
- Airline Ground Staff Award
- Airport Award
- Alpine Resorts Award
- Amusement Award
- Dry Cleaning and Laundry Award
- Fitness Award
- Hair and Beauty Award
- Hospitality Award
- Live Performance Award
- Models Award
- Marine Tourism and Charter Vessels Award
- Nursery Award
- Racing Clubs Events Award
- Racing Ground Maintenance Award
- Registered Clubs Award
- Restaurant Award
- Sporting Organisations Award
- Travelling Shows Award
- Wine Award
This increase is a result of the Fair Work Commission’s announcement after conducting its Annual Wage Review. The Fair Work Commission is the independent national workplace relations tribunal. It is responsible for maintaining a safety net of minimum wages and employment conditions, as well as a range of other workplace functions and regulations.
Workplaces are expected to ensure that all of their employees are being treated fairly and paid the minimum rate relevant to their circumstances (award/base minimum rate).
Employers and employees can visit www.fairwork.gov.au or call the Fair Work Infoline on 13 13 94 for free advice and assistance about their pay and compliance requirements.
Are you concerned about potential non-compliance with the new minimum wage, want to know more about the other increases to different kinds of rewards? Trying to get your head wrapped around the new superannuation guarantee requirements, or after some business planning advice in the approach to the new year? We’re the people you can speak to about any concerns you may have for your business and its future.
Did you know that there are 31 different business registers that a business or company may need to be registered with that are a part of ASIC? Some of these registers are being brought together, in what will be known as the Australian Business Registry Services (ABRS).
The Commissioner of Taxation was appointed in April 2021 as the Commonwealth Registrar of the ABRS. In the near future, registering a company will be done through the ABRS instead of ASIC. This is a part of the government’s move towards a more efficient digital economy.
Previously, a company or business was registered through ASIC, where a Tax File Number and an Australian Business Number would be required. These are obtained through the Australian Taxation Office (ATO) and are a critical part of setting up a business or company.
Beginning from November 2021, there will be an additional step introduced in the registering of a company, involving a Director Identification Number (DIN).
This director identification number is a unique identifier that a director will apply for once and keep forever.
Every company director will need to have a DIN prior to 30 November 2022, with Indigenous directors having an additional year (till 30 November 2023) to adhere to the new requirement.
This applies to directors if their organisation is a company, registered foreign company, registered Australian body or Aboriginal and Torres Strait Islander corporation.
In the future, registering a company will be done through the ABRS instead of ASIC. This is a part of the government’s move towards a more efficient digital economy.
Directors will need to apply for their director ID themselves because they will need to verify their identity. Eligible persons that have sufficiently established their identity, will be provided a DIN that they will keep for their lifetime – even if they cease to be a Director.
No one else will be able to apply on their behalf.
The new DIN Requirements apply to appointed Directors and acting Directors of Australian corporations and registered foreign companies, which includes those companies who are responsible for managed investment schemes and registered charities. This is set out under the Corporations Act 2001 (Cth).
As of the time of writing, the DIN requirements do not extend to unincorporated bodies, de facto or shadow Directors, or company directors.
DIN’s will be recorded in a new database to be administered and operated by the Australian Tax Office and be made available to the public.
The ATO will also have the power to provide, record, cancel and re-issue a person’s DIN. A DIN will be automatically cancelled if the individual does not become a Director within 12 months of receiving the DIN.
Following the DIN, the ARBS will then take over the Australian Company Register, the Business Names Register, and the Australian Business Numbers (currently on the Australian Business Register).
The ABRS is responsible for the implementation and administration of director IDs. ASIC will then be responsible for the enforcement of associated offences.
It is expected that around 10% of all Australians will require a DIN.
Despite the small number, it is a crucial part of the plan to prevent and halt phoenix directors from being appointed to companies, who then rack up significant debts that no one is held accountable for.
It is believed that this change will make the process cheaper, faster, and easier, as companies will no longer need to be first set up through ASIC before dealing with the ATO for an ABN and TFN.
If you currently have a company and do not already possess a MyGov account, now is the time to rectify it in the move towards DINs.
Innovation is one of the pinnacles of good business practice. However, sometimes innovation isn’t a process that can be achieved by one person alone. In business, some of the best ideas and practices that your business might achieve could occur through collaboration.
Most businesses will have understood the impact and importance of internal collaboration between team members and already put into place tools to help promote this. However, what exactly does effective business collaboration look like?
Business collaboration is the leveraging of internal and external connections in order to generate ideas, find solutions and achieve common goals for your business. It can be done internally (through collaboration with your team), or externally (through the combined efforts of multiple businesses).
Many businesses are already seeing the benefits of remote collaboration within their teams, especially with regards to the time being saved and the increase in productivity.
Businesses may also find that learning opportunities are presented to their employees and team members through the interaction and collaboration with other businesses that could benefit them, with additional knowledge and skillsets gained throughout the process.
Even with many restrictions remaining in place that limit travel on both domestic and international scales, businesses are able to confer with remote workers and businesses through the assistance of digital technologies, thus enabling collaborative efforts to continue
As restrictions ease and businesses are able to engage with one another once again in face-to-face settings, remote collaboration tools can be used to facilitate inter-business collaboration from the ease of anywhere.
- Instant messaging – allows for quick online communication for day-to-day business with the teams involved.
- Video conferencing – replicating face-to-face contact without the need to travel into the office or to a meeting space.
- Online workspaces – communicating, collaborating, and sharing ideas in one online space, without the need to be in the same room or even area
- Cloud sharing – cloud tools offer functionalities for collaborating on files, tasks, projects, and calendars in real-time in one accessible, shared online space.
These tools allow businesses to work uninterrupted with individuals, clients and other businesses, as the distance between is no longer a major inhibiting factor to operations (if operations can be conducted away from the site). It can also potentially promote global interconnectedness for the business, as collaboration does not have to occur at a local or domestic level.
Your business might not collaborate with other businesses in exactly the same way as a business in the same industry. It’s important to know what might be the right form of collaboration for your business to benefit from it – and doing that will depend on what you may want to get out of it, and how long you may want it to last.
This is known as the traditional type of business collaboration, usually involving two or three companies temporarily working together. They are able to reach a common goal by combining their resources and knowledge, which can be effective for businesses with knowledge/resource gaps that another business could temporarily fill.
Competitors can be great collaborators if used appropriately. Co-opettion involves collaborating with competitors so that businesses can share resources, avoid duplication of their work and generate new customers for all parties involved.
When one large business manages a broad collaboration with multiple smaller, external partners, this is known as portfolio collaboration. The main, central business sets the rules for the collaboration and maintains it, offering many of the benefits of an alliance but in a long-term form that generates more connections between businesses.
Simply put, community collaboration uses one of the greatest resources that a business may have at its disposal – the community. Essentially, businesses collaborate with individuals or other businesses that are within their community. This can be done via both the business community (e.g local business partnerships) AND the customer community (e.g. social media influencers).
If a business knows of other businesses with similar goals and values that they want to uphold, they may instigate network collaboration. This style of collaboration means that the businesses may not necessarily be in competition with one another but, with shared interests can collaborate on mutually beneficial projects with access to one another’s resources and customer base.
Your business may choose to collaborate with other businesses through:
- A wiki, which can be used to share knowledge, improve training and contribute towards a strong company culture.
- Cross-promoting, where the businesses promote one another on various platforms. This could be done through social media, running partnered promotions, or even by getting creative with guest posts on websites or a shared podcast.
- Running a networking event to find new clients and potential future collaborators, which can be conducted online or in person.
- Community events can be a great way to connect your business with potential customers and collaborators, and running it with another local business is an effective way to put yourself out there and foster connections that could lead to long-term partnerships.
The rapidly changing and digitally-inclined business world means that businesses that don’t prioritise collaboration – both internally and externally – are likely to fall behind. Making the most of collaboration solutions and tools allows collaborations to be streamlined, which is beneficial to all involved.
If you are looking for advice on how to structure these collaborations or work out the best way to get involved with other businesses, you can plan out your way forward with our help. Start a conversation with us today.
Being a contractor offers flexibility, choice and more control over your own schedule. It also means that you have different responsibilities from other employees that you may have to fulfil.
For employers, knowing the difference between a contractor and an employee is a must. It can lead to costly penalties if the two get confused.
An independent contractor is someone who operates under an ABN and is not an employee of the company that they perform work for. They may also provide services to another person or business,
Sometimes an independent contractor may operate their own business and have many clients, in other cases the independent contractor may only do work for one company.
There are a number of factors that determine whether or not you may be classified as a contractor versus an employee. These can include:
- How much control you have over the work you are conducting for the business – the more control you have, the more likely it is an independent contracting relationship.
- If you are allowed to pick when you are working – employees have set hours in their agreement.
- If you are running your own business and can have other clients while doing the work for this particular business.
- If you are able to delegate or subcontract the work to others.
- If you are the one responsible for your work and insurances – employees are covered by their employer, contractors are responsible for organising their own.
- If you are expected to have your own equipment prepared for the work that you will be performing – employees will be provided with the equipment that they need.
- If you bear financial risk for your errors. You might have to redo the work for no pay if you get it wrong
In Australia, independent contractors often use the sole trader business structure when operating and conducting their business. Due to this, there is a legal requirement that you register an ABN for yourself or your business if operating as a contractor/sole trader.
Having an ABN is important. It identities you and your business to the government, and helps with tax and other business-related activities.
Not everyone may be entitled to an ABN (especially if they are considered to be an employee for the work that they are performing),. As a sole trader though, you are as you are considered to be starting or carrying on an enterprise.
For those who wish to contract you for your services, an ABN means that your clients will not be required to deduct tax from you. If you invoice an organisation without being in possession of an ABN, they are required by law to deduct tax at the highest rate that they can, as well as declare the income you receive from them through to the ATO.
If you’re operating as an independent contractor or sole trader, losing a chunk of your income to tax before you even get paid isn’t something that you’re likely to want to happen. That’s why having an ABN is important for you, to ensure that that doesn’t happen.
If your business is looking into creating a working relationship with a contractor, you need to be careful that you do not fall into a sham contracting arrangement.
A sham contractor arrangement is when a business (or individual) tells a worker that they are an independent contractor. It can exist even if the worker is treated like an independent contractor in some ways such as having an ABN and providing invoices like what a genuine independent contractor might have to do.
It’s illegal, and may be done knowingly by an employer to avoid taking fiscal responsibility for paying legal entitlements to employees. It is illegal to:
- tell an employee they are an independent contractor
- say something false to convince an employee to do the same work for the employer but as an independent contractor
- dismiss or threaten to dismiss an employee if they don’t become an independent contractor, or
- dismiss an employee and hire them as an independent contractor to do the same work.
If you are concerned that you may be involved in a sham contracting arrangement, or are an independent contractor looking for assistance in ensuring that you are remaining compliant with your current obligations when it comes to tax, super or business, we can assist. We are also equipped to help you with dealing with an ABN.
A Restructure Only Means A Setback To Your Business, And Not A Closure – Here’s What The Reforms Could Mean For Your Business
With the demanding conditions that have plagued the retail industry over the past twelve months, business owners need to be aware of all the restructuring options available before it is too late.
COVID-19 has unfortunately resulted in reduced foot traffic, store closures, the accumulation of legacy creditors and significant deteriorations in working capital positions.
Even with the support of JobKeeper and other government initiatives buoying business ventures from early 2021 to now, many family and small businesses are sure to continue to struggle.
The Misconceptions Of Formal Restructures
The idea of restructuring your business or reaching out for external help can appear scary and often seen as something to be avoided at all costs. However, business owners are not on their own when dealing with the difficult conditions facing them in their short-term future.
No one wants to see a business fail.
That’s why there are always options available to businesses. However, the longer a company holds off on making a decision, the more the business and its available options will deteriorate.
If companies and businesses can act early enough, their options include informal arrangements and advice, voluntary administration, and new restructuring reforms for small businesses.
With the availability of these options and the right people involved, there is no reason why a financially distressed small business cannot survive the challenging times and thrive in the future. All companies experience some form of distress from time to time and often at no fault of their own. The ones that survive focus on cash, seek appropriate advice from trusted advisors at the right time and act further on it.
How Might A Business Survive Financial Distress
Using the voluntary administration process as a restructuring tool allowed Tuchuzy (a well-known retailer in Bondi) to successfully deal with legacy creditors, refocus on high margin product lines, and ultimately, the company continued to trade profitably.
The key to Tuchuzy’s restructure was a ‘light touch’ administration to minimise costs and disruption to the business and closely working alongside the director to ensure the proposal submitted to her creditors would be acceptable than an immediate winding up scenario (of which it was).
There is a lot of flexibility and breathing space afforded in the voluntary administration process.
The administrator can quickly reset the cost base by exiting unprofitable stores, reducing the workforce, and focusing on only buying and selling favourable margin products.
Even when a liquidation becomes necessary, the process can be reasonably quick, fair and transparent if run properly.
The secret is to overcome the general stigma accompanying restructures and approach restructuring experts early who will ‘unemotionally’ explain each available option and provide an impartial recommendation that aligns best with the individual circumstances.
What Do The New Small Business Restructuring Reforms Mean For You?
For a business with few creditors and a single location, the process of voluntary administration can be expensive and unnecessary.
Indeed, voluntary administration is often not appropriate for many small businesses due to associated financial costs and the hurdle accompanying a director relinquishing control.
The government has responded to this critique and offered an alternative. This alternative comes at a perfect time as directors are, once again, exposed to personal liability for insolvent trading.
The new small business restructuring (SBR) reforms offer a lower cost and far simplified restructure process, critical for small businesses to continue to trade after government assistance such as JobKeeper ceased in March 2021. The reforms add an essential new path that will assist many retailers.
Though there have been only a handful of SBRs to date, and their effectiveness to save businesses is yet to be appropriately evaluated, it is an option to explore in the right circumstances.
Critical Questions Your Business Should Be Asking
The COVID-19 crisis has put a severe strain on many previously successful businesses. Though the government and many advisors are attempting to ensure that they do not collapse, directors and business owners need to be proactive and engage early for them to work.
Often businesses approach liquidators and advisors at the point where their financial problems have become insurmountable, and a liquidation/shutdown is often the only option left. The timing of coming and asking for help can be the difference between a shutdown and the continuation of trading.
With proper preparation and an effective plan that considers all stakeholders, any business should be able to restructure and continue to trade.
If your answer to any of the below questions is yes, you should seek immediate advice from a trusted restructuring advisor.
- Am I currently losing money?
- Am I finding it hard to pay bills on time?
- Have I got old debts that I am finding hard to pay down?
- Do I need some breathing space?
- Do I have my ‘head in the sand’?
Making decisions as the owner of a business can be a world of difficult choices, but none so much as deciding that your business requires a partner. It’s a critical, strategic decision for the business that you won’t want to get wrong.
Approach your search for the right business partner to suit your business as you would a life partner. As a major legal covenant, a partnership is not unlike a marriage of sorts in the business world. It’s also something that you won’t want to rush into. A good partnership requires:
- A shared vision and goal
- Mutual hard work
- Open communication
- Mutual respect
- A balance of power
- Effective conflict resolution
You might already have an idea of what you are looking for when it comes to a business partner, but it’s still important to identify key aspects of what makes a good one.
Critical Skills & Experience
A candidate for a business partner should possess skills and experience that can be brought to the table which complement that which you already possess. They may possess strengths that you simply do not, which can make it easier to start, plan, grow and run a business.
For example, you may be a customer relations extraordinaire but struggle with the operational aspect of business development. That might be the skillset you look for in a business partner.
If the candidate for a business partner can also provide you with the resources and credibility for your business on top of sharing your vision, this can be a gamechanger. Those resources could include a secure business network, industry connections, client list or specific credentials and expertise that can add value to your business.
Values, Entrepreneurial Spirit & Business Vision
You will need to be able to communicate effectively with your partner to make decisions, set goals and drive the business forwards. Aligning your values and business vision with your partners will help facilitate your business’s development and growth without hindrance.
Minimise The Personal Intruding On The Professional
If your prospective business partner is facing serious challenges in their life, they may translate over to the business. While giving someone a chance to challenge themselves is an honourable act, running a small business takes focus, time and tremendous energy that they may not be able to afford to give.
Personal & Business Ethics
A partnership should be a mutual and trusting relationship. Someone who values honesty and practices good personal and business ethics should be at the top of your list. You don’t want to be involved with someone whose moral code does not align with yours, or who could get you involved in legal matters that may besmirch you and your business’s reputation.
Also, if you cannot respect your partner or they cannot respect you on a professional level, your ability to work as a team will suffer, and your clients will read into that as a lack of professionalism. Never partner with someone that you do not respect, or who does not respect you.
In the event that you choose or have chosen a business partner that is not right for you, make sure that everything agreed upon for the partnership was set out in writing, as breaking the partnership is no easy matter. With a lot of legal ramifications that you may face in dissolving the agreement at play, having evidence and a plan can save you plenty of grief.
For assistance with drawing up partnership agreements, business planning or simple advice on anything brought up here, you can speak with us.
If you’re looking to go into business with someone, the chances are that you might be looking at using a business structure known as a partnership. A partnership is a type of business structure that is made up of two or more people who distribute income or losses between themselves and is a fairly popular form of structure amongst those looking to develop a business.
It offers ease and flexibility to run your business as individuals, eliminates the need to create a company structure and avoid reporting obligations. You’re also not going into creating a business by yourself, which can be an added bonus for some and reduces some of the initial financial burden and uncertainty of the setup.
Just as there are advantages to choosing to set up a partnership, one must also examine the disadvantages.
A partnership generally exists between two or more parties, so disagreements in management may occur, and decision-making may never be truly equal. It can be difficult to add or remove partners into and out of the partnership, and adding more partners can make the partnership more complex to manage.
Partnerships also generally do not receive access to many government grants (barring special exemptions).
A partnership business structure may be the structure for you to employ as they possess the following key elements:
- Partnerships are relatively easy and inexpensive to set up
- Have minimal reporting requirements
- Require separate tax file numbers
- Must apply for an ABN and use it for all business dealings
- Share control and management of the business
- Don’t pay tax on the income earned, as each partner pays tax on the share of the net partnership income that each receives
- Do require a partnership tax return to be lodged with the Australian Taxation Office (ATO) each year
- Require each partner to be responsible for their own superannuation arrangements.
There are three main types of partnerships that you may have come across in your own research. Each one has advantages and disadvantages that you may want to take into account when considering what would be the best suited to your situation.
A general partnership is where all partners are equally responsible for the management of the business. For any debts and obligations that may be incurred by the business, each partner has unlimited liability for them.
A limited partnership is made up of general partners whose liability is limited to the amount of money that they have contributed to the partnership. Those involved in this style of partnership are known as limited partners who are usually passive investors without a role to play in the day-to-day management and running of the business.
An incorporated limited partnership is where the partners involved in this type of partnership can have limited liability, but at least one general partner must have unlimited liability. If the business cannot meet its obligations, that general partner (or partners) become personally liable for the shortfall and debts.
Each state and territory has different legislation and regulations that must be abided by when setting up a partnership. Learn what is legally required from you prior to setting up your partnership, or discuss with us what you may be obligated to do.
Sometimes you might want to set up a structure where you will share in the spoils with everyone that deals with that structure. There is a specific type of structure for this and it is known as a Co-Operative.
A co-operative business structure (or co-op) is a legally incorporated business entity that is designed to serve the interests of its members. Co-operatives may be profit-sharing enterprises or not-for-profit organisations.
A cooperative business serves members by providing goods and services that may be unavailable or too costly to access as individuals. There are two types of cooperatives that businesses can be set up as.
Distributing cooperatives are able to distribute any annual profits to members of the cooperative. They are required to share the capital that they make, and members of this type of cooperative must own the minimum number of shares specified in the co-op’s rules.
Non-distributing cooperatives cannot share their profits with members of the cooperative. All profits must further the cooperative’s purpose, and the cooperative may or may not issue shares to the members. Members may be charged a subscription fee if there is no share capital
Some popular cooperatives business structures include:
- Consumer co-operatives, which buy and sell goods to members at competitive prices in a variety of sectors.
- Producer co-operatives, which may process, brand, market and distribute members’ goods and services, or supply goods and services needed by their members, or operate businesses that provide employment to members.
- Service co-operatives, which provide a variety of essential services to their members and communities.
- Financial co-operatives, including co-operative banks, credit unions, building societies and friendly societies, which then provide investment, loan and insurance services to their members.
Family-run businesses form an essential part of the economy. Tradition, success and history along with their unique dynamic can create a thriving business that many may wish to see continue.
However, as with any business, the conversation about succession and how to continue the business into the future needs to be had.
With only 1 in 4 family-operated businesses considering their approach to succession formally, succession in a family business is one of the greatest viability risks to the actual business and needs to be addressed accordingly.
Every family and family-run business is unique, and every transfer or succession of a family business will also be executed differently. If you are thinking about what your family business’s plan is for succession, you may want to consider keeping these critical factors in mind:
- Where is your business going? What do you want for your family and business? What are your goals and your time frames for achieving those goals?
- Is the vision you have for your business shared by your family? It is important to consider this for the succession of your business, as a mutually shared vision will ensure that the business continues on the projected path even after the business has been passed onto the next generation.
- What obstacles and challenges will your family business face? You need to be able to understand the different perspectives and motivations of each individual that the succession impacts. Ongoing communication is vital to gaining this understanding, but an advisor can be employed to unbiasedly look at the situation independently and take the emotion out of a conversation.
- Create a plan to plot out the path of the business’s future, and the challenges that the business may face along the way as well as what it is currently facing.
- It’s important to remember that a family business does not have to be succeeded by a family (though it’s an outcome you may want). Always consider what the members of your family wish to do, and consider alternatives if none wish to take over the business.
A succession plan for a family business needs to be created to move forward and should detail all of the actions you intend to take (including the steps involved with both management and ownership succession).
It needs to be flexible, adaptable and ready to evolve, as businesses (as well as families), change over time. Your succession planning process should be transparent and understand and align with the goals you have set out for the business’s further development across the generations.
The most effective succession plans:
- Preserve and generate family wealth
- Minimise disharmony and disruption
- Minimise the impact of tax
- Encourage personal growth of family members
- Fund the retirement and family lifestyle
- Bring clarity to where the business and the family are heading.