SUCCESSION PLANNING

The most important question that any seller needs to be able to be able to answer clearly is

What do you want ?

Can you clearly articulate the outcome you are seeking ? All to often we speak to vendors who have taken a lets see what happens approach which in most circumstances creates confusion and indecision. Clarity on your ideal outcome is really the first step. Once clear the next steps are answering questions around 2 key themes namely CONTROL and TIMING

As a seller the next key questions to answer before structuring a progressive sell down are :

  1. What valuation methodology will be utilised for the initial purchase and what will be used for future purchases?
  2. What quantum of equity should be transferred at what stages?
  3. When should control be passed over?
  4. How does the management structure operate as new equity holders are introduced?
  5. How will the successor fund the transaction?
  6. What operating structure will be most suitable for the business going forward?
  7. What will the structure and content of shareholder agreements look like?

CONTROL

Who has majority control and exactly what level of control do minority shareholders have? Consider how key decisions in the business will be made around

CAPX
Hiring
Bringing in new partners
Business development / marketing
Internal system changes

TIMING

Beware of a binding obligation to sell the entire amount as you  may be obligated to pay full Capital Gains Tax in Yr 1. An alternative is to put in  Put / Call Options. Critical is a clear understanding of the timing of the second payment and contingencies should this not occur as a result of the buyer, the seller or because of mutual agreement. Also critical is agreement on the valuation method to be used at stage 2.

Growth Focus has current data plus anonymous case studies to share should you wish to test your assumptions. Feel free to call Steven Fine directly on 0414299153 for current market feedback and numerous succession case studies.

 

Buying or Selling an Accounting Practice

Buying or Selling a Financial Planning Business