Business succession planning

There are many ways a business relationship may come to its inevitable ending, and all will fall within one of the following categories:

– voluntary exits
– involuntary exits

A voluntary exit could be when a partner wants to sell his/her share in a business due to a lifestyle change – such  as retirement, divorce or new career – or being unhappy working in the business, and just wanting out. Staying in the business may lead to frustration, decreased performance and business devaluation.

Common sources of funding for voluntary exits include, vendor funding (the exiting partner is paid a percentage of profits over time until his/her proceeds have been paid out), and loans or capital from new partners coming into the business.

An involuntary exit could be when a partner is forced out of the business due to lack of performance or disagreement; or worse, the death, disability or illness of a partner.

A common source of funding for involuntary exits is personal insurance. A life, disability or illness benefit, can be used to compensate the family in exchange for the transferral of ownership to existing partner(s). By carefully structuring the insurance policy, the exiting partner’s family is compensated when such an event is triggered.

An important element for successful execution of a business succession plan is having a robust legal framework agreed by all partners. The framework should comprise relevant legal documents covering exit conditions, such as predetermined business valuation methodologies, key performance indicators and buy-out funding mechanisms.

So when should you start to think about succession planning?


In his bestselling book 7 Habits of Highly Effective People, Stephen Covey defined a key principle for success as ‘Begin with the end in mind’. So the best time to start developing a succession plan or exit strategy for yourself is at the initial planning stage of your business. However, it’s never too late! A qualified succession planning professional can assist you wherever you are in the business lifecycle.

At Orbis Wealth Management, we help businesses plan, manage and protect the succession objectives of their businesses. We provide end-to-end project management from development of individual and corporate goals to the financial, legal, and ongoing management of the business succession plan.

We assist our clients to retire comfortably when they choose, maximise the value of their businesses whilst ensuring their number one asset is always looked after.....

... their Family.

Important information and disclaimer
This publication has been prepared by Simon Dundas-Smith.  Simon Dundas-Smith and Orbis Wealth Management Pty Ltd are Authorised Representatives of Consultum Financial Advisers Pty Ltd ABN 65 006 373 995 AFSL 230323.
Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Accordingly, reliance should not be placed on the information contained in this document as the basis for making any financial investment, insurance or other decision. Please seek personal advice prior to acting on this information.

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