FAQ’s

General Questions

Why should I be thinking about succession now?
How do I determine the value of my business?
How do I choose my successors?
Why do I need to fund my own succession?
What is a Peak Performance Trust and how does it relate to sucession?
Which is the best sale – an internal or an external sale?

Employee Incentives & Retention Questions

How can I get my staff thinking like business owners?
Why is a competitive regular pay packet no longer enough?
Why should I implement this plan, as opposed to another?
What will this do for my business?
Can my business afford this?
How do employees receive their entitlement?
How are funds invested?

Asset Protection FAQs

When is the right time to start thinking about an asset protection strategy?
What does asset protection require?

How can I get my staff thinking like business owners?
Ask any owner of a small or medium-sized business what their greatest challenge, yet most valuable asset is and they’ll agree – it’s their staff.
What would it mean to your business If you could recruit and retain high calibre employees that were as committed and engaged as you are? You can achieve this by developing an innovative employee compensation plan that gets your staff thinking and behaving a lot less like employees and more like business owners.

Why is a competitive regular pay-packet no longer enough?
A regular pay packet is no longer enough to win the war for talent. Even competitive pay packets may increase your ability to attract and retain, but not necessarily to promote ownership behaviours of your top executives once they are in the door.

Conversely, short-term incentives might be highly motivational in the short-term, may promote business growth and individual accountability, but are not likely to help you retain your top talent for the long term.

And Combining both? Well sure, if you want to cripple your cash flow!

Understanding the long-term business strategy, PPT can align your pay programme so that employees are motivated to achieve strategic objectives, and calibrates pay opportunities to incremental performance for ultimate effect.

See our Succession Planning Articles for more details.

Why should I implement this plan, as opposed to another?
PPT is a plan specifically designed for privately owned Australian SMEs. There is no product like PPT available in Australia, and the SME first-mover advantage in this space is obvious.

Unlike the complex plans adopted by public companies, PPT is a simple procedure, with no additional administrative stress. We project manage the implementation through every stage, and stick around to maintain the plan for you.

More can be found on benefits of PPT to your business here.

What will this do for my business?
• PPT will directly assist you in achieving your long-term corporate objectives, as we align rewards to their achievement.
• PPT will not only fit with, but enhance culture
• PPT will improve morale as staff enjoy the tangible and achievable benefits
• PPT provides competitive advantage to early entrants
• PPT becomes the appropriate framework for the planning of immediate, short and long-term reward strategies
• PPT assists in employees’ and business owners’ wealth creation

Can my business afford this?
Perhaps the question should be can you afford not to invest in your employees? The plan is designed and operated specifically for SMEs, taking into account investment, cash-flow and effect.

Designed to reward performance above a base level, contributions can be made as follows:

• To the plan as long as it would not force the business into loss, or turnover is below the benchmarked minimum
• Once the gross profit target is achieved the agreed percentage of extra profits will be added to the PPT
• The bonus amount for each employee should represent around 25% pf their salary – this is a meaningful base to work from
• Bonus payments should be in addition to current packages
• Bonus is to be allocated quarterly once the relevant documentation is received to confirm financial information/KPIs
• Total Turnover and participating profit margin can be calculated so that it reflects actual net collected income and profit. Thus, discounts, refunds and bad debts should be deducted from Gross Revenue

When planned and implemented like this, the PPT is affordable to most SME businesses.

How do employees receive their entitlement?
Employees should be allowed to choose the manner in which they receive their bonus payments when they become eligible. The choices are:

• Additional cash salary
• Contribution to a superannuation fund of their choice
• Other benefits items as approved

Importantly, funds accrued by employees may be used in the future by for a future management buy out or buy in. This provides a way, when you are ready, to create and fund your own succession plan.

How are funds invested?
PPT recommends adopting external funds – at least initially, and these investments be made by a certified Financial Planner. However, it is within the guidelines to allow Investment, loan and/or lease of these funds to entities within the business group i.e. If you like, you can invest, loan or lease the funds can in other Group companies or business units instead of an external fund.

Why should I be thinking about succession now?

The key to the success of your succession plan is ensuring that the value of your business is maximised when you are ready to sell. This takes time; it cannot be done overnight and it cannot be done without proper planning. If you want to use your business equity to fund your future lifestyle, you need to plan now to ensure the value locked up in your business is released to you on exiting.

How do I determine the value of my business?
Most business valuations involve an assessment of past profit and a determination of what that profit is worth in ‘today’s dollars’. Many are based on:

• The industry in which the business operates
• The business risks and future prospects
• The profitability, cash flow and financial position of the business.

How do I choose my successors?
Prepare a checklist of all the important qualities that future owners of your business must have, and rank prospective successors against these criteria. The checklist should include specific skills and areas of expertise as well as values, financial capacity and other measures that are important in achieving a successful match between you and the prospective buyer.

Why do I need to fund my own succession?
What many business owners fail to understand is that succession planning is not simply an exit strategy. It’s also an entry strategy for those assuming responsibility – whether family, employees or an external buyer. Two of these three potential successors might be buying houses, having children and experiencing other financial pressures which render them unable to spend the cash for equity in the business. This is why developing a funding plan such as a Peak Performance Trust is integral. Not only can it ensure the smooth transition of your business to employees or family, but a good plan maximises the value of your business even if you decide to sell externally.

What is a Peak Performance Trust and how does it relate to sucession?
A Peak Performance Trust is an investment trust into which contributions are made on behalf of employees. Your business commits to investing a predetermined amount on a regular basis, according to participants achieving pre-determined performance goals. As the profit increases, so too does the share that employees benefit from, but if profit is not increased, no further allocation is made.

It is a program that attracts, retains, motivates and rewards private business staff for the long-term, builds a fund for succession, and adds considerable value to the business. For more information, visit www.buildit.net.au.

Which is the best sale – an internal or an external sale?
Internal sales or management buy-outs have been, in our experience, the most value-maximising processes in succession, for a number of reasons. Not only do they give you greater certainty about the ongoing potential of your business, but you can time your transition to the company’s needs. Further, the people who work in your business know more about it than anyone else, and if you had your share plan in place, they will have developed the ownership behaviours required of them to ‘step-up’.

When is the right time to start thinking about an asset protection strategy?
Before its too late. Like any type of insurance, asset protection requires you to take preventative measures before you have a problem, in the hope that you will never have to rely on it.

The ideal time to start planning your asset protection strategy is before you start your business or buy an asset. When you’re just starting out, you don’t experience the implications of an incorrect structure because there are usually few assets to protect, but fast-forward a few years and that incorrect structure starts to become a costly burden.

If you’re already ten or twenty years into your business it is possible to implement an asset protection strategy. You can chose to wear the costs and restructure completely, or do it over a period of time, or establish a new structure.

Whatever stage of your business or investment lifecycle you are at, there are positive actions that can be taken.

What does asset protection require?
Asset protection requires:
• An assessment of the risks that exist within your business and investments (including those faced by individuals).
• An understanding of the importance of moving assets as far away as possible from exposure to those risks.

And the expertise to be able to achieve this while still enabling you to enjoy the benefits of your income and wealth.