While it may be difficult to think about letting go of your broking business, succession planning will make that transition much easier when it does happen. Here’s a closer look at what a succession plan is and why it should be part of your overall business strategy.
What is succession planning?
Succession planning is the process of planning for the future of your business after you retire or move on to other opportunities. Depending on your goals, it may involve selling to another broker (external succession), transitioning the business to a broker in your firm (internal succession), or retaining ownership to create an income stream for retirement. Here’s a brief introduction to each of the three options.
- External succession
With external succession, the business owner sells and exits the broking business, at which time clients are handed over to the new owner. External succession could be a good choice if you’re a broker who has flown solo throughout your career – as it helps enable you to make a break from your responsibilities and walk away from the business when the time is right.
With external succession, it’s important to think about how to grow your business’s value at least one to five years before a sale takes place. The longer the lead time, the greater the chance you have of being a deal-maker, not a deal-taker.
- Internal succession
Internal succession involves the recruiting and development of a broker to take over your position when you retire. Mastering regulations, processes and client management takes time, and it may require up to a decade of experience before a candidate is ready to fill a senior role. That’s why you should start thinking about choosing your successor several years before retirement – ideally someone who’s motivated, growth-oriented and shares a similar service philosophy as you.
While internal succession requires a long-range planning horizon, it can allow you to phase in reduced hours as you approach your retirement, while giving you a high level of control over the transition process.
- Retaining ownership
If you’re looking to create a retirement income stream while maintaining your status as a broking business owner, retaining ownership is another viable succession option. As with internal and external succession, the decision to retain ownership should be well-planned in advance and not a default option.
In particular, it’s important to take into account the consequences this could have on your service level and reputation and the risk of declining health in retirement.
What are the benefits of creating a succession plan?
Succession planning gives you the power to take a proactive – not reactive – position in your broking business. It creates a safety net for owners, employees and clients by allowing everyone in the business to:
- work towards stated goals, resulting in better financial outcomes
- prepare clients and staff for changes ahead of time
- stay one step ahead of events and potential conflict.
Building wealth for the future involves making the right decisions today. Talk to us at PLAN Australia and find out more about succession planning for your broking business.
This information does not constitute legal or financial advice. Please consider your circumstances before acting on this information