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Secure the Future: Succession Planning for Small to Medium Businesses

What would happen to a business if key people – owners, executives and specialist employees - couldn’t be there tomorrow? As insurance brokers, we’ve seen firsthand how a well-laid plan can mean the difference between continuity and chaos when a business changes hands. But for many business owners, succession planning is a "someday" task, often pushed to the backburner until it’s urgently needed.

GSA tapped into the expertise of life insurance specialist, Steadfast Life, in putting together key ideas to help small businesses start developing a succession plan and better prepare for the future.

Why Business Succession Planning Is Essential

Succession planning is the roadmap for how a business will continue to operate when the current owners or key people step down, retire, or face unforeseen events like illness or death.

Without a succession plan, businesses are left vulnerable to legal challenges, financial loss, and the risk of forced sales. 42% of Australian businesses experience significant operational disruption when a key person dies or becomes disabled (Sensis Business Index). Yet, only 19% of business owners currently have a succession plan in place (Australian Institute of Company Directors).

Addressing business succession needs is becoming more important, especially with 60% of small business owners aged over 45, with many approaching retirement(Australian Small Business & Family Enterprise Ombudsman).

Planned vs. Unplanned Succession

There are two main types of business succession: planned and unplanned.

  1. Planned Succession: typically occurs when an owner or key person retires or steps down. With careful planning, this process can be seamless, allowing the business to continue with minimal disruption.
  2. Unplanned Succession: refers to a key person(s) suffers and unexpected events like illness, disability, or sudden death. Without a plan, businesses may be left scrambling to fill roles, be forced to sell or even need to dissolve the business entirely.

Cost-Effective Funding for Unplanned Succession

Unplanned succession can place a heavy financial burden on a business. This is where tools like keyperson insurance and buy/sell agreements become invaluable. These solutions provide a financial safety net, ensuring that if a key person can no longer fulfill their role due to injury, illness, or death, the remaining owners have the funds needed to keep the business running.

Key person insurance and the use of life insurance policies is a particularly cost-effective way to provide the essential liquidity required during such a crisis. Without these financial measures, businesses may be forced to sell or partner with someone who doesn’t align with the company’s vision or goals.

Understanding your unique business succession needs, GSA proactively discuss potential risks and recommend the right solutions for your ongoing success.

Where to Start with Succession Planning

Navigating the complexities of succession planning such as tax implications, legal structuring, and funding requires specialised expertise. While clients rely on GSA as their primary advisor, partnering with a specialist like Steadfast Life ensures they receive robust, compliant, and customised solutions.

Start the Conversation Today

With so few business owners prepared for the unexpected, we can see where to add value by initiating these critical conversations. Succession planning doesn’t just protect a business - it preserves the livelihoods of those who depend on it.

GSA partners with Steadfast Life in offering expert insights and support, ensuring you have appropriate insurance solutions to secure your legacy.

Contact us today.

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