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- What is transition planning?
- You’re a lawyer, why did you move into this area?
- What would a business owner get out of doing transition planning?
- What’s the difference between working with a financial adviser or accountant?
- Can you give an example of how you helped a business owner looking to retire?
- Peters top tips for business owners that are approaching retirement
Retiring can be one of the biggest life changes we ever make and needs careful thought and planning. If you own a business then likely that planning will be more complex than leaving a job and you may need to start getting ready up to five years ahead.
We talked to Peter McKnoulty, a Transition Planner, who specialises in helping clients create rich and rewarding lives after running a business about what they need to do if they’re considering retiring.
What is transition planning?
“It’s a process that helps business owners, executives and professionals plan a fulfilling life after work. We help clients create a personal transition plan which outlines their ideal life after running a business. And we help business owners create a business transition plan to help them transition out of their business successfully. The aim is to work with the personal and financial.”
You’re a lawyer, why did you move into this area?
“As a Succession Planning Lawyer, I specialised in taxation, business structure and estate planning, and especially family and business succession planning. However, I saw that many of my clients who were approaching retirement, were not really focused on their succession or retirement strategy.
Plus I found that many business owners found it difficult to consider letting go of what they had worked so hard to create, and because of that they were often hanging onto their business, and often didn’t leave their business well, which resulted in adverse personal and financial consequences.
Many people I spoke to knew of friends or relatives who hadn’t mentally prepared for life after running a business, and they were now bored and unhappy, which caused stress for them and those nearest to them.
I went looking for a way to help business owners move on successfully and discovered The Successful Transition Planning Institute of Boston (STPI). They have programs designed to help professionals through the succession process, which they view as a transition. I completed the STPI training course and now I’m a certified Transition Planning consultant. I’ve got four more TPC’s who work with me in Australia.”
What would a business owner get out of doing transition planning?
“We work with business owners to develop a tailored business transition plan to assist them to work with their team of advisers to increase the value of their business, identify potential buyers and then successfully transition the business to those new owners in the most personally and financially rewarding way. But we can also support the personal side of the transition focusing on their unique circumstances and goals – so they realise their dreams.”
What’s the difference between working with a financial adviser or accountant?
“We’re not financial advisers or accountants. Actually, we work with financial advisers to complement and enhance the services they offer to their clients – we bridge the gap by helping clients plan the personal side of their transition. Which in turn, enables a client to determine their ideal lifestyle so they can then work with their financial adviser on their financial plan. A business owner preparing their business transition plan will work with their accountant on issues such as business valuation, taxation, business structures and the sale process. Transition planning enhances the value of the services an accountant or financial adviser offers to their clients.”
Can you give an example of how you helped a business owner looking to retire?
“I worked with Glenn 62 and his wife Robyn, who run an electrical contracting business for medium-sized commercial developments. The challenge they’re facing is, what’s the best way to leave a successful business?
Their years of hard work have resulted in a business that delivers high margins, combined with low overheads and efficient work teams. But they’re also married to their work (as well as each other). They’re incredibly busy and have barely taken any time to consider how and when they’re going to retire.
The first step for Glenn and Robyn was to develop a personal transition plan to decide what they wanted to do after full-time work. Quite quickly they were excited about the possibilities they discovered for a rewarding and exciting next stage of their lives.
After this they got clarity that they wanted to ease out over time, while working to maximise the value of their business, so they could ensure a smooth operational handover, while also taking the time to plan their personal transition to retirement.
Glenn and Robyn have taken their completed personal transition plan to their financial advisor to work out how much would be needed to fund their retirement. Then, their business transition plan covers issues such as the worth of the business, the value of goodwill, and the potential to increase the value of the business with new systems and processes.
Glenn and Robyn are exploring two main strategies:
- Their two electricians, Sam and Bridget, taking over the business. While this is attractive, Sam and Bridget have limited funds available, so Glenn and Robyn are working with their Transition Planning Consultant and a team of advisors to devise a solution that would see them realise a fair value for the business in a way that Sam and Bridget can afford. They will most likely transfer shares in the business over time. This complements an operational transition strategy for Glenn to train Sam and Bridget on key operational aspects of the business such as design and client liaison during the transition period.
- Creating a charitable trust using some of the proceeds from the business. This would enable Glenn and Robyn to work with their children to help those less fortunate than themselves.
Their plan is to ease out of the business over about five years. Now they have the clarity and confidence to be able to work towards that.”
Peters top tips for business owners that are approaching retirement
- Take action now – you get better outcomes the more time you have to plan.
- Create space out of your schedule to seriously consider what you want your life to look like after work.
- Get professional help – you’ll need support and guidance through the process, especially if you want sell or restructure your business.
- Spend as much time on personal as well as financial goals when you’re are planning.
Peter McKnoulty has been a partner with McCullough Robertson Lawyers in Brisbane for 25 years. He’s also the founder of Transition planning Australia.