Posts Tagged ‘Succession Planning’

“You don’t really have to convince anyone about the benefits of share plans; it’s self evident. Engaged employees want to have a stake in their company – surveys (and everything else) show that .And it’s good for the business those employees work for.” Paul Bailey, tax principal at Deloitte.

As the government reviews the taxation treatments of employee share plans – many others spend time wondering why they don’t further promote and encourage them. The benefits are clear for both employees and the business and there are many success stories where performance has improved and the employees now own a slice of the company they work for – thinking and acting and being rewarded as business owners not employees. “For companies, a key benefit of having an employee share plan is the way it helps align the interest of its employees with its own interests.” – Money magazine August 2009.

When combined with a strategic succession plan, which allows a gradual sell down of ownership equity to employees as part of the plan, the two combine to provide certainty in the exit process – certainty as to timing, price, funding ( ownership succession ) and a managed transition of control ( leadership succession ).

By refusing to retire to allow a renewal of the government, Mr Howard had failed as leader: “Leadership’s also about your departure, you know,” Peter Costello told the Herald.

Obviously bitter about the result – but the message is clear for business owners as well – hold on for too long at your peril !

Don’t forget whilst succession planning is often about your exit – it is also about the entry of your successor and both need to be managed carefully. The ongoing continuity of your business is one of the key outsomes we must be focusing our planning towards and this is greatly enhanced by:

Not hanging on too long
Identifying the right / best successor
Grooming the successor
Ensuring a smooth handover / transition
Communicating all of the above clearly to all stakeholders.

Like most business owners real estate practices are particularly vulnerable to key staff leaving the business and taking with them key relationships, clients and information. Over the last month Michael Bova & I have spoken at 8 specific real estate functions on succession planning and the overwhelming feedback from attendees has been the desire to find a mechanism to engage key staff (including sharing the profits and rewards) and fund their own exit plan as part of the process.Many real estate businesses have grown well beyond the size where it is a simple and affordable for an individual to purchase that business – it is now quite common for rent rolls to exist with 500 or 1000 properties and at today’s multiples this is a sizeable purchase for any individual to make. While some funding is available (for more information on some of the funding options I strongly recommend the NAB hosted seminar this Thursday morning – see further details below) the funding will never carry 100% of the purchase price nor is it good practice to carry 100% of the risk.We have had considerable success with real estate businesses before by introducing a Peak Performance Trust to attract, retain, motivate and reward key people within your business. Another interesting finding during our tour was how many businesses were looking to their property manager as the most likely successor – in fact several business owners told me not only did property managers have the character, skill set and personalities to be good business leaders but often salespeople didn’t. Now of course there are many good salespeople running good real estate businesses are doing a good job – but we do often overlook property managers in terms of our real estate business succession strategy and the message here is simple – Don’t overlook any one.Please contact us to find out more information and asked for a copy of our Succession Plus Real Estate Industry report which includes updated industry benchmarking and some commentary from our recent conversations with agents throughout Australia.

There are a number of factors that are considered differently in the valuation of privately held vs. public ( ASX listed ) companies—even those that are in the same industry—making a direct comparison for valuation purposes difficult. In some cases, it’s like comparing apples to oranges. Following is a list of some of the issues that may result in differences between the valuations of public and private businesses:

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Richard Pratt’s strong succession plan has been supported in several media articles today, with most praising one of Australia’s most successful businessmen for his foresight and planning in implementing a detailed succession plan ( at least five years ago ) to ensure his business was not consumed by restructuring at the time of his death.As explained by smartcompany.com.au:
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