The one big thing you probably haven't done (but should)


Succession Planning

What will happen to your business when you’re no longer around to run it? What will happen to it when you retire? What happens to it if you can suddenly no longer work?

A major survey of 1500 Capricorn Members, State of the Nation, suggests not enough Members are considering these crucial questions. It discovered a third of Members have no succession plan in place and almost another third believe it’s too early to think about either retirement or transitioning ownership of the business to someone else.

 

Here’s what the study found. (Note: percentages are rounded.)

 

 Succession Planning  Total of all workshop owners  Workshop owners aged 18 – 34 years  Workshop owners aged 35 – 54 years   Workshop owners aged 55+ years
 Have a succession plan in place  38% 13% 31% 56%
 No succession plan 33% 39% 32% 32%
 It’s too soon to think about transition and retirement 29% 47% 37% 12%

It’s never too early to plan for succession 

Capricorn CEO of Automotive, Brad Gannon, said it’s understandable that many Members don’t have a succession plan in place, because the conversations involved — with family, business partners and employees — can be hard.  

But it’s not just that the unexpected death of a business owner throws the workshop’s operation into chaos, it’s also about the efficient and productive running of the workshop today. 

“Having those conversations, even if you’ve got no intention of moving on anytime soon, is a way of engaging your staff in the success of the business,” Mr Gannon said.  

“Rather than just turning up and doing their job, employees think ‘I’m invested in coming in here, working hard, and making this business a success, because one day it could be mine.’ 

“I think more so than in many other industries it is important for workshop owners to address succession planning as soon as possible. 

“Having a succession plan in place identifies what skills are required in a workshop for the owner to take a step back. You’re also empowering people and getting them to buy into the success of your business. Members can be far more successful by developing the right talent and keeping them engaged.” 

 

Working on the business, not in the business 

Encouraging staff to learn more about all aspects of the operation and giving them greater responsibility for the success of the business also make life easier for the workshop owner, Mr Gannon said. 

“Without a long-term succession plan in place that identifies what knowledge and skills need to be developed and maintained within the business, too much will continue to fall back on the owner,” he said.  

“This puts the business at risk of being overly reliant on a few key people who may move on or are totally reliant on the owner. And it also puts the owner at risk of burnout if they feel they can never get away from the business to spend time with their family or just take some time off to reflect on how they’re going, where they’re at, make some broader plans.” 

Mr Gannon said having a succession plan in place means if you ultimately need someone to take over, or take a greater load, that option is available to you. 

 

How do Members think they’ll “get out” of their businesses? 

The State of the Nation study also asked Members about their future plans for their business when they were ready to retire. 

Here’s what they said. (Note: numbers are rounded.) 

 Business after retirement  Total  Australia  New Zealand
 Put it up for sale  39% 37% 46%
 Transfer ownership  24% 24% 22%
 Haven't thought about it/don't know  23% 23% 21%
 Close it down  12% 13% 8%
 Other  2% 3% 3%

Mr Gannon said Members who have succession plans in place will also benefit from the goodwill they have accrued in the business. 

“I think too many of our automotive businesses have developed so much value in goodwill in their business which without a succession plan will get lost,” he said.  

“If you just close your doors, you don’t pass on all your customers to anyone else, so you don’t get the true reward of all the goodwill that you’ve developed.” 

Is it time to think about a succession plan?  

If you don’t have a succession plan in place, it’s time to start having those important conversations. Even if retirement is decades away, there are sound business reasons to have a plan in place.  

Not sure what to do about your own succession planning? Talk to your Capricorn Account Manager and ask what other workshops have done. Or, contact your solicitor. They can help you draft a plan. 
This article was published 20/11/2020 and the content is current as at the date of publication.