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Everything You Need To Know About Succession Planning

Who does it apply to?

Succession Planning involves everyone. Whether it is planning for retirement or exit from your business or getting your ‘papers’ together for end of life, Succession Planning refers to both and is applicable at all ages.

While it may not be something that many people in their 30s or 40s may think of, being in the prime of their life, and it may not be on the top of their priority list, but it is something you need to consider. It’s important to decide what will happen to your assets when you die. I know when I was in my 20s, I thought I didn’t have assets, but when I went to a bank for a loan, I realised that I actually had quite a few assets. You need to consider how and to whom you should leave instructions about your legal and medical preferences in case you fall ill or lose the capacity to make those decisions yourself. If you have children, you should consider what provisions to make for their care or what you might want to do to help them. Therefore you should ensure that you have a valid and up-to-date Will and seek estate planning advice if appropriate.

For a business, a succession plan ensures there are qualified and motivated employees who are able to take over when the executive director or other key people leave and organisation. It also demonstrates to stakeholders (i.e. clients, funders, employees and volunteers) that the organisation is committed to and able to provide excellent programs and services at all time, including during times of transition. 

So, what is it? Why is it important?

An Estate Plan includes your Will as well as any other directions on how you want your assets distributed after your death. This includes documents that govern how you will be cared for, medically and financially, if you for whatever reason are unable to make your own decisions in the future.

With your business, whether you decide to sell up, retire or have to get out of business due to health reasons, it is important that you spend the time with your family and/or your business partners and plan what you are going to do. A succession (or sometimes called an ‘exit plan’) can help you outline what will happen and who will take over your business when you leave.

Your succession plan will depend on a number of factors, including your family situation, age, financial position and overall health. A good succession plan enables a smooth transition, with less likelihood of disruption to operations. By planning your exit well in advance you can maximise that value of your business and enable it to meet future needs. Please keep in mind that your succession plan must remain attainable – set a realistic timetable and measurable milestone along the way and stick to them. Even if you’re not planning on leaving your business just yet, it pays to have a detailed plan in place for when the time comes.

Another reason to focus on succession planning is the changing realities of workplaces. The impending retirement of the baby boomers is expected to have a major impact on workforce capacity.

Benefits of a good succession plan for your business

The benefits of good succession planning include:

  • Ensuring the organisation maintains a plan to support service continuity when the executive director, senior manager or any key people leave;
  • A continuing supply of qualified, motivated people (or how to identify them), who are prepared to take over when current senior staff and other key employees leave the organisation. This involves knowing your staff and knowing if you have someone to replace them;
  • Alignment between your organisation’s vision and human resources that demonstrates an understanding of the need to have appropriate staffing to achieve strategic plans;
  • A commitment to developing career paths for employees which will facilitate your organisation’s ability to recruit and retain top-performing employees and volunteers.


A will comes into effect after you pass away. It can cover things like how your assets will be shared, who will look after your children if they are still young, what trusts you want to be established, how much money you’d like donated to charities and even instructions about your funeral.

Your will can be written and updated by private trustees and solicitors, who usually charge a fee. Some Public Trustees will not charge to prepare or update your will, but only if they act as the executor of your will. Other Public Trustees may only exempt you from charges if you are a pensioner or aged over 60. Check with the Public Trustee in your state or territory.

Who is responsible for succession planning in my business?

Both the board and the executive director have pivotal roles to play in succession planning.

The board is responsible for succession planning for the executive director position. The board hires the executive director to ensure it has a skilled manager to implement the organisation’s mission and vision. It is therefore very important for boards to spend some time reflecting on what they would do if, or when, the executive director leaves. All too often, boards find that they are unprepared for such an occurrence and are left scrambling to replace them.

The executive director is responsible for ensuring a succession plan is in place for other key positions in the organisation. These will likely be developed with help from the management team with input from implicated employees. 

What do I need to do?

Identify key positions for your organisation. These include the executive director, senior management and other staff members who would, for their specialised skills or level of experience, be hard to replace. Which position would need to be filled almost immediately to ensure your organisation continues to function effectively?

Review and list your current and emerging needs.

Prepare a chart that identifies the key positions and individuals in the organisation. This may include those listed above as well as others that are pertinent to your organisation, such as volunteers or administrative personnel.

Pinpoint and list any gaps by asking questions:

  • Which individuals are slated or likely to leave (through retirement, project completion, etc.) and when?
  • Which new positions will be required to support the strategic plan?
  • Which positions have become or will become obsolete (for example, those related to a program that has been terminated)?
  • What skills and knowledge will need to be developed (for example, to support a new program)?

Evaluate/assess staff members who have the skills and knowledge or the potential as well as the desire to be promoted to existing and new positions. It is important to note if they have the desire to take any other role. It could be terrible for your business if you were to rely on someone ‘stepping up’ only to find they aren’t interested. 

Do you have any tips for successful succession planning?

As time passes, your circumstances will change and it is important to update your succession to ensure you are always ready, should the need arise that you leave earlier than anticipated.

You need to secure senior management and board support for a succession planning process. This shows employees and staff how important succession planning is to the organisation.

Again, review and update your succession plan regularly. This ensures you reassess your hiring needs and determine where the employees identified in the succession plan are in their development.

Develop procedure manuals for essential tasks carried out by key positions. Include step-by-step guidelines. Nothing worse than having a long-term or busy employee who leaves (for any reason) and most of the procedures were ‘in their head’. That makes the ‘scramble’ after the employee leaves so much worse.

Allow adequate time to prepare successors. The earlier they are identified, the easier it is on the individual to be advanced and on other employees within your organisation who will know whether certain options are available to them.

Final notes

Wills are just the same. You need to consider what you want to leave and to whom. Regularly check your will and make sure it is brought up to date. Ensure your family is aware of your wishes.

Communication is key to Succession and Exit Planning. You need to communicate with family, colleagues and all key staff members. You need to express to them what you want. Then get the plans drawn up (by a legal professional or by the Public Trustee).

All too often, a will has been drawn up but there are other issues that prevent the exiting person’s wishes from being following. These include not keeping documents up to date; not discussing it with anyone; the will being written up without professional advice (this includes having the will drawn up but the legal professional was not aware of all the circumstances).

Are you interested in getting your will and your succession plan decided started? For your free initial consultation contact us today, one of our friendly advisers would be delighted to speak with you.

Please note: The information provided in this article is general advice only. It has been prepared without taking into account any person’s individual objectives, financial situation or needs. Before acting on anything in this article you should consider its appropriateness to you, having regard to your objectives, financial situation and needs.

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Finance And Accounting For Small Businesses

One of the most exciting business activities we undertake here at The Investment Collective is to help small businesses, restructure, grow or divest.  The use of the word “exciting” is deliberate.  More often than not the task is an emotional roller-coaster, where best intentions are often undermined by client fear, once “supportive” banks, angry creditors and warring business owners.  Through our involvement with small business, one thing has become clear – many, many small business owners have no idea of how to run a business.

Now, before you bridle at my perceived arrogance, consider that we are nearly always called when things are obviously bad. We nearly always find that everything is in the owner’s head, the financial records are terrible, and there are no budgets, business plan or financial model in place.  Frequently, we find that the situation has been brewing for months or years and that the ATO is owed money.   Overwhelmingly, we are called in with the expectation we will “fix everything”, using the simple tools of charm and magic.

The basic fact is that shit happens in business.

You cannot accurately predict when you will lose a client, a crop, or a valuable staff member, but you can very much take ownership of your business, formally understanding it, and putting in place disciplines such as those mentioned above.  Compared to growing your favourite crop, or selling interesting products, or fabricating machinery this mightn’t sound too exciting, but without these disciplines, you won’t be getting much joy from anything when the shit does hit the fan.

Sound dramatic?  Consider that it can take several months to build a formal set of accounts from the data normally found in the back offices of small businesses, and to build bankable forecasts from that.  Believe me, you won’t have that time if you really are facing a downturn.  Consider also, that recognising and quantifying a downturn before it really sets in gives someone like me much more opportunity to address the situation early – something that the banks will appreciate and that will give you the best chance of coming through the other side.

So, business consultants like us can be a very big help in structuring and ensure your business is well run and able to manage through downturns, but in every case, the effectiveness of that help starts with you.

Get yourself a good accountant.

Many businesses choose their accountant because they are a “good bloke/gal”, but like financial planners, accountants come in all shapes, sizes and levels of professionalism and competence.  Too many are simply collectors for the ATO with a high opinion of themselves, and charges to match. But they don’t really deliver anything useful and too many clients view the role of the accountant as one of tax reduction.

What a really good accountant will do is not only help you fulfil your statutory obligations but make sure your accounts actually mean something to the business.  From the way your accounting software is set up to the production of financial reports, the accounting data is at the heart this.  It is your window into how things are really going and it needs to be collected and tabled regularly and rigorously, to clear and generally accepted standards, and in any event suitable for handing to the bank as-is.

At the end of the financial year, your internal accounts need to be reconciled to the formal statutory accounts, so that management accounts for the new year start from the right base.  If you don’t do this, you’ll be completely lost – it’ll only take a few months.

In summary, few accountants are good business consultants or strategists, and most business consultants and strategists focus on just that.  To get the best result you really need to consider engaging both, preferably in a form where they agree to happily work hand in hand.  If you do this, your financial records will become a tool through which business management becomes easier and easier, you will have fewer worries because you will be more in control, and you will have an informed support base armed with detailed and up-to-date data, for which there is no substitute when a storm approaches.

Please note that this article is prepared as general advice. It does not take your personal or professional circumstances or goals into consideration. To learn more about our business consulting services, contact us today.

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How To Protect The People In Your Business

Business owners are usually aware of the need to protect assets such as the business premises, plant & equipment, vehicles and stock via general insurance.  However, few owners consider the risks to the future of the business by not appropriately covering its most important asset – the people within the business!

Business owners should also contemplate the financial loss if personnel responsible for the equity, credit or ongoing revenue exit the business unexpectedly due to sickness, accident or death.

Business risk protection strategies for key personnel within a business include:

Buy/sell protection; Also known as partnership protection.  Allows shareholders in a business to insure for the value of their equity to cover death, total & permanent disability or serious medical conditions such as heart attack, cancer stroke etc.  If a partner suffers from an insurable event and exits the business, the proceeds of a claim will be paid to the disabled owner, or their family in the event of death.  The cover will ensure that the departing owner or family receive fair value for their share.  In addition to the insurance, a legally binding buy/sell agreement should be completed by the shareholders.  The buy/sell agreement or ‘business will’ provides the legal mechanism by which the shares of the deceased/disabled owner can be acquired by the surviving shareholder.  Buy/sell cover is a vital part of your business succession planning, as it ensures that the ongoing ownership and control of the business remains in the hands of the original shareholders.

Business Loan cover; In order to obtain a loan or credit facilities from a bank, business owners will need to provide guarantees, and may use business &/or personal assets to secure the debt.  The debts are usually ‘at call’ and the bank can request payment in the event of the death or incapacity of the guarantor.  By obtaining adequate cover, their guarantees/securities are protected, and the surviving business owner(s) &/or family will not have to sell off assets to clear the debt.

Revenue protection cover; Also known as key person cover. The loss of a key person due to disability or death may create costs to locate, recruit and train a replacement, and result in a loss of revenue until the new staff member is operating at the capacity of the disabled or deceased employee.  This cover will offset the replacement costs and the expected reduction of revenue until the business can recover from the loss of the key person.

Business overheads cover; Provides the replacement of the fixed operating costs of a business if the owner is unable to work due to sickness or injury. Overheads which are covered include loan repayments, rent, utilities and salary costs.

Please note that this has been prepared as general advice. It has not taken into account your personal or business circumstances, insurance needs or current coverage. If you would like to learn more about business insurance, contact one of our Risk Advisers today.

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Capital Gains Tax: What You Need To Know

Small businesses are vital to our economy and their sale can help fulfil their owners’ retirement dreams.  Since September 1999, there have been a number of Small Business Capital Gains Tax (CGT) Concessions available to allow business owners to cash in on years of hard work, blood, sweat and tears.  However, it is important that these concessions are correctly navigated; otherwise, there is a good chance that the “Taxman” will walk away with a big chunk of your hard work.

Business and Active Assets

The CGT provisions give a number of concessions to clients who sell a business or active business assets.  An active asset is:

  • an asset the taxpayer owns and uses or holds ready for use in carrying on a business and has been active for the lessor of 7.5 years or 50 percent of its life;
  • an intangible asset inherently connected with the business (e.g. goodwill); or
  • an interest or shares in a resident company or trust where the market value of the underlying active asset is up to 80 percent of total assets for at least half of the ownership period of the interest/shares.


To be eligible for the concessions the following conditions must be met:

  • you are an individual, partnership, company or trust;
  • you are carrying on a business;
  • you are a small business, defined as having an aggregate annual turnover of less than $2 million; and
  • your net assets value plus the net asset value of the client’s associates must be less than $6 million (excluding home, personal use assets, life policies and superannuation.

The Concessions

15-year Exemption

If the business or active asset was owned continuously for 15 years, and you are over age 55 and retiring, you can sell the asset or business without being assessed for capital gains.  In our example above, the Smiths would be able to take home $270,000 each.

50% Active Asset Reduction

There is a 50 percent reduction on the capital gain from the sale of an active asset or business.  This is in addition to the 50 percent CGT discount if the asset has been held for 12 months or more.  If Mr and Mrs Smith implement this strategy they would incur a $43,875 tax bill and take home $496,125.

Retirement Exemption

A client can elect to have a capital gain of up to $500,000 from the sale of an active asset or business treated as a superannuation benefit payment.  If you are under 55, then this amount must be contributed into a superannuation fund and will add to the tax-free component. Once you reach the age of 60, all superannuation benefits are exempt from the tax, provided you meet the conditions of release.  This strategy can be applied after the CGT discount and would allow the Smiths to contribute $135,000 to each of their superannuation accounts.

50 percent Asset Reduction + Retirement Exemption

If you have multiple business assets that you wish to sell to fund your retirement, you may be at risk of exceeding the $500,000 limit.  To circumvent this limitation, it is possible to apply the 50 percent asset reduction as well as the Retirement Exemption.  This strategy allows the Smiths to contribute $67,500 to each of their superannuation accounts, providing breathing room for an additional contribution of $432,500 to each down the track.


If you sell an active asset, you can defer all or part of the capital gain for two years.  You can defer this even longer if you utilise the proceeds to acquire a replacement asset, or if you spend money to improve an existing asset.  This concession can also be applied after the 50 percent asset reduction.


It is vital that your personal financial position is carefully analysed when considering these concessions, as the above is provided as general advice only and should not be taken to be personal advice. Even if your circumstances are similar one of the above examples, please speak contact us to a business consultant today.

The last thing you want is to see the proceeds of your hard work end up at the ATO when you had access to professionals that could have navigated you through this tricky process.  So if you are a small business owner with an eye on retirement, please come in to see one of our helpful Consultants or Financial Advisers to get a plan specifically tailored to your financial goals and objectives.


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Business Consulting: What Is It And Why Do You Need It?

As with every aspect of our business, there is no greater importance than the opportunity to strengthen our relationships with clients by helping them navigate towards their financial goals.  Quite a number of our clients are business owners and it has been an exciting year for our business consulting team, which provides business advisory services for all sorts of challenges faced by owners and managers.   Current projects have drawn us into the agriculture, digital media sharing, solar power, consulting, and construction industries.

Late last year we were approached to establish and raise capital for a start-up engineering firm in Brisbane.  The first few months of the project involved us working with the Managing Director conducting a thorough analysis of expected future costs and revenue.  We analysed the industry’s dependence on broader macroeconomic factors such as commodity prices and Government expenditure. Once we had a clear picture of the expected performance of the firm, we prepared an Information Memorandum ready to present to potential investors.  We are now assisting the client in finding investors.

Some time ago, we were engaged to facilitate the sale of an extremely successful building materials manufacturer.  The business’s directors have spent over a decade growing the business in a rapidly growing market and are ready to reap the rewards of their hard work.  We built a financial model for the business and prepared an accompanying Information Memorandum ready for presentation to potential purchasers.  We also prepared a contingency plan, in case we could not find a buyer willing to commit to suitable terms.  In that case, we will look to recapitalising the business and installing new management.  The processes take time – you have to be tenacious to see it through, and not panic when faced with various setbacks.  Our personal and professional experience is completely aligned with these requirements and we are confident of achieving an excellent outcome for all involved.

A successful grain and oilseed farming enterprise required our assistance after separating from the previous ownership structure.  Our responsibilities broadened as the enterprise began to encounter financing restrictions and flooding of their crops.  Luckily, we had already built a detailed financial model that facilitated the preparation of contingency plans including seeking additional financing.  Our consulting team also investigated and completed an application to receive “cheap” funding from the NSW Rural Assistance Authority Farm Innovation Fund to build a much-needed machinery shed.  Now, eight months into their new cropping season, our clients’ business is completely stand-alone and this year’s crops are looking very promising.

As with our financial planning work, our help for businesses is hands-on.  We do our homework properly, and we get involved.  We are a professional resource, a trusted advisor and a friend to lean on.  We do not give up and our team is always available.

The above are just some examples of what The Investment Collective can do for you and your business. It has not taken into consideration your business or your business’ needs. Contact us today for a consultation where your personal financial circumstances and business goals will be discussed in more detail and advice will be customised to your current situation.

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Why Financial Modelling Is So Important

Finding it hard to manage your business’s finances? Unsure of how to price your products or services? Don’t know how much you can afford to spend on wages and expenses? Want to gain an accurate value of your business? Sounds like you need a financial model.

All business operators are concerned with the profitability of their business, but it is difficult to gain an accurate grasp of its real financial position purely from monitoring bank balances and receipts. So often is the case that business owners in successful times lose incentive to monitor their financial position. This can come back to haunt management once times start to become gloomy as they ponder “How did this happen?” “What were we doing right before?”. As silly as it sounds, sometimes an Excel spreadsheet can answer all of these questions (and more!).

Financial models are a key element in most major business decisions. A financial model is prepared whenever any organisation is considering project finance, bidding for a project, evaluating acquisition targets, carrying out monthly financial planning and budgeting, conducting capital structure studies, or just to monitor the business’s profitability.  Accurate financial models are also a staple requirement if you are trying to source financing from investors or lending entities.

They are useful tools that allow business options and risks to be evaluated in a cost-effective manner against a range of assumptions, identify optimal solutions in evaluating financial returns and understand the impact of resource constraints to make the most effective business decisions. A truly effective financial model is one that dynamically updates as the economic and business climate changes.

Our Consulting team has extensive experience in developing financial models which draw from historical performance and management’s expectations for the future. Once a tailored financial model has been created, sensitivity tests are run to generate accurate forecasts and budgets to allow management to determine how they should operate in the future. From here, we can provide recommendations on other business functions.

Businesses from agriculture, engineering, finance, heavy machinery and retail industries have approached us to construct conservative financial models that enable business owners to “hope for the best, but plan for the worst”. In 2016 we had the pleasure of constructing a dynamic model for a grain and oilseed farm in NSW. The original need for the model was to gain a value of the enterprise for the purpose negotiations and restructuring. However, as new problems were encountered, such as restricted access to financing, falling crop prices and even flooding, management quickly realised the true power of a financial model: it’s a tool that provides insight into how to develop clear contingency plans. Similarly, a sports store facing a severe cash flow crisis was able to trade their way out and re-finance through using our no-nonsense approach and financial modelling.

If you or anyone you know owns a business that needs to review their financials to take their business to the next level or faces increasing uncertainty, then now is the time to deal with it. Contact us today, toll free on 1800 679 000 for our Rockhampton office and 1800 804 431 for our Melbourne office to have a free initial consultation.

The information provided in this article is general advice only. It is prepared without taking into account your objectives, financial situation or needs. Before acting on the advice in this article, please consider the appropriateness of the advice, whether the advice is appropriate to you, your objectives, financial situation and/or needs, before following this advice.

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