SUCCESSION PLANNING

Succession planning should never be an afterthought. The best time to decide your exit plan is when you start the business. If you are already trading, then it is never too early to put plans in place. We see that early succession planning gives business owners the most options for the future.

For family businesses, a good succession plan can be even more important. Do you want the family business to be passed down to the next generation? It is never too early to discuss those plans in detail with everyone involved. If the younger generation does not want to join or stay in the business or industry, what choices would you make differently?

What does a good succession plan look like?

> Early – the earlier you start planning, the more options you have for exit. There may also be training needed for the younger generation to take over the business – exit should be something worked towards as a team over years.

> Realistic – the first step of succession planning is working out what you have now, where you want to be at retirement, and how you are going to get there.

> Inclusive – there is no point planning for your kids to take over the business if they are not involved in that conversation.

> Flexible – succession planning, both personal and business, is working towards a goal but also planning for the unexpected. A good plan should be able to adapt to unexpected events.

> In writing – have the key milestones documented or in a diagram that everyone has seen and can refer back to when things change.

Example

Parents Jack and Jill Hill own JJH Building Co. They also own multiple commercial properties, one which is leased to the business. Their 3 kids Anne, Bob and Calum all work in the business. Jack and Jill have always assumed that the 3 kids would take over the business when they are ready to retire. Unfortunately, due to some unexpected ill health, they need to leave the business about 5 years earlier than originally planned.

The scenarios for Jack and Jill look very different when they have good succession plans in place, compared to if they don’t.

Good succession and estate planning

> Jack and Jill got financial and legal advice before buying their properties. They have in place structures to maximise the tax effectiveness of their investments.

> About 10 years before their planned retirement, Jack and Jill started discussions with their 3 kids about taking over the business.

> From those discussions, they discover that Anne and Calum are keen to keep working at JJH but don’t feel they have the skills to run the business. Bob is planning to leave the industry to become a chef.

> Jack and Jill put in place some training plans for Anne and Calum, and by the time they are ready to retire they make a gradual transition out of the business and Anne and Calum take over.

> Bob will receive a small share in the business so he can receive a share of profits or be bought out by his siblings.

> Jack and Jill have enough resources to support them in retirement and old age.

> Jack and Jill can equally split their assets between the kids when they have both died, because the business was effectively transferred while Jack and Jill are still active.

No estate planning or formal succession plan

> Jack and Jill own the business and all their properties in their own names.

> They both intend to keep getting around to getting wills and powers of attorney done, but are both so busy in the business.

> Both Jack and Jill assume that the 3 kids will take over. They have never had that discussion with them though.

> When Jill gets sick, they look to the kids to step up and take over the business. They are surprised when Bob leaves shortly afterwards, leaving them to fill a key position at short notice.

> Anne and Calum start managing the business, but they both find it stressful and it impacts on their relationship. Neither has financial management experience or training, and this leads to the business dropping in profitability.

> Jill did the books and was the only signatory on some of the accounts. Anne and Calum can’t pay wages one fortnight when Jill is having surgery.

> When both Jack and Jill pass away, the 3 kids have a very expensive dispute about how to divide their parents’ assets. Anne and Calum feel they should get more than Bob, because of all the stress they had in trying to keep the business going.

Like Daughter, Like Father WITH TEMPERLEY HOMES

Carly Dewey established Temperley Homes in 2011, after spending several years working for subcontractors whilst studying for her builder’s licence. Today, Carly has a team working with her to deliver residential projects. The team includes her dad, Joe Tominac, and her grandfather, Joe Senior. Carly was exposed to the building and construction industry from a young age, with her Dad Joe an electrician and all-round handyman. “Dad said to me we need a licence in the family”, said Carly. “So I went and got it. It felt like a natural career path for me after being in and around the industry for as long as I could remember.”

The name, Temperley Homes, was inspired by the street that Carly lived on when she was younger. Temperley Homes has created beautiful and functional spaces for many years and have recently started offering custom contract homes. Carly said, “Offering contract homes meant

I could branch out and work on different projects. When I first started trading, Dad and I would work closely together, selecting sites and developing them ourselves. His passion is the outside work, so he would take control of the site preparation and excavation. Once the formal decisions need to be made for the design and construction of the interior of the house, that’s my role.” info@elvingroup.com.au

Joe is still intimately involved with Temperley Homes, with Carly describing their working relationship as a mixture of love and hate, with a lot of yelling and swearing at times. “I have three sons and they often ask why I was fighting with Pop all the time. I’d have to tell them that we’re both so excited and passionate, we’re not fighting, just making decisions.” That is, unless there was a decision or discussion around selections, with Carly suggesting her Dad’s taste in interiors was pretty terrible. At the heart of their fiery discussions, Carly and Joe are figuring out how to harness their passion and differing opinions to deliver the best results for their clients on each project.

Despite often being the only female on a residential construction site, and too frequently being asked where the builder is, Carly’s business and Temperley Homes is thriving. This year, Carly contributed to the Strathnairn Charity House, a partnership between Master Builders ACT and Ginninderry, where vital funds have been raised for Hands Across Canberra and other local charities. The project also aimed to encourage more women to join the construction industry by showcasing the talented women already working in construction. Carly is a perfect example to women that if you have passion and perseverance, you can create your own opportunities in the building and construction industry.

Carly is also kept incredibly busy with her three young children, and her husband just launching his own physiotherapy business.

With no sign of slowing down anytime soon, it will be fantastic to see how Carly’s success will influence generations of talented women to come.

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