All business owners should account for the company’s strategic direction when building the succession plan as well as providing for the business’ survival in the event of death or disability of key management according to Deloitte Tax Partner, Craig Holland.

“Many private business owners have not taken the time to develop a written business plan, which is current and relevant. As businesses grow, the management-succession process becomes more and more complicated, which is why they may avoid the task,” Mr Holland said.

“A formal plan must be developed, implemented and monitored in order to ensure the successful transfer of knowledge, skills, abilities, values, talents and behaviours in order to maintain the business culture and management effectiveness.

“Too often the next generation is expected to gain the necessary executive skills by osmosis. Yet management succession may require more formal planning than ownership succession.”

Mr Holland said the survival of the business and family wealth may also depend on the development of a contingency plan.

“Business owners need to also plan for the survival of the business in the event of death or disability of key management.

“The opportunities and benefits far outweigh the risk of not undertaking succession planning in a disciplined way.”

Deloitte today released the second of an eight-part series which looks at the transition to the successor, including how to manage and develop talent, advantages and disadvantages of different entity structures, contingency planning and financing options. This part also focuses on these business elements and how they should be incorporated into an overall succession plan.

Part three of the eight part The art of business succession series will be available in June 2007.

Related links:

• read part two of the series: Business continuity and growth
• listen to the podcast.