“How To Improve Your Game” and develop a ‘Builders Kick-Arse Business Success Toolkit”

Come along for breakfast and a golf day on Monday 2nd May 2016. Either stay for the Builders Kick-Arse Business session or stay for the whole day for a round of golf (and great networking).

With the Bay of Plenty building industry booming with sixty million dollars worth of building consents were issued in Tauranga in December in 2015. The value of building consents issued during the years was the highest for both local authorities since Priority One records began.

In these booming times as a builder you are required to balance the busy demand and run a smooth profitable business. We don’t have to tell you what goes into running a successful business – blood, sweat and tears are only the beginning.

With so much paperwork to complete, keeping on top of all the bills and invoicing, rosters and site work plans – it can all go wrong very quickly.

Too many builders and subbies go bust because they have been blindsided by bad debt, huge outstanding bills to pay and everyone looking the other way when you need extra finance.

If you’re finding it hard to:

• Communicate effectively and efficiently with your customers and suppliers
• Understand your numbers
• Know where your cash flow is at
• Get your invoices out on time, your debtors are growing and the money isn’t coming in like it needs to
• Provide financial reports so the banks get off your back and gives you some breathing space
• Keep up with who the best suppliers are and how to negotiate the best deals

You’ve come to the right place.

During breakfast we will host a short presentation. We have speakers who can help you with efficiencies, productivity and money management. These guys are equally as passionate as you are about their trade, which is assisting business success and growth.

One of the riskier periods of business is when you in a growth phase. You have wages and suppliers to pay and then wham – one big, bad debt and it could be all over. With good people and good systems we’ll show you how to eliminate this real risk to your business.

Accounting One’s, purpose is to help the Bay of Plenty Builders Kick-Arse with the right toolbox and thrive, grow and succeed! They’re a great team who work for you and with you to keep your business humming.

Dale is a golf fanatic so he would love as many of you to stay for the day and play a round of 18-hole golf on him. Enjoy a game of golf and grab a great networking opportunity.

Why not bring a few of the crew? Building a successful business relies on building a winning team around you.

The day kicks off at 7.30am with a hearty “builders” breakfast at the Omanu Golf Club. You get to mix and mingle with other guys and girls in the building trade – meet your next best sparky or buddy up with a builder to build your business with.

Contact Dale or Sonja to secure your spot today.

For most assets, it is straightforward to determine whether expenditure is deductible. If the asset is only used to derive income or used in business, related expenditure will generally be deductible.

If the asset is only used privately (such as a private house or a car) then no deduction is available for related expenditure.

Because mixed-use assets combine both private and income earning use in a single asset, questions arise about the appropriate portion of expenditure that will be deductible.

The easiest way to explain this is to divide expenditure into “daily amounts”. If a bach is used by its owners for 40 days in a year, and rented out for 25 days in that year, it is clear that:

• 40 days’ worth of expenditure is not deductible
• 25 days’ worth of expenditure is deductible.

What is not clear is what happens to the expenditure which relates to the 300 days of the year when the asset is not used at all.

Under the previous rules, the 300 days when the asset is “available for income-earning use”, also gave rise to deductions. This means the owner would claim deductions for expenditure relating to 325 days, or 89% (325/365) of total expenditure.

This was not considered an equitable outcome, given that the asset was used both for income earning and private purposes, and indeed, the principal purpose of acquisition may well have been private.

In order to address this issue Inland Revenue undertook an extensive review of the rules applying to mixed-use assets and new apportionment rules were introduced from the 2014 tax year for assets relating to the provision of short-term accommodation and the 2015 tax year for boats and aircraft (with a market value of more than $50,000 at acquisition)

For the purposes of these rules, the asset will include any assets which are related to it. For example a holiday home includes items such as the furniture and appliances and a yacht includes items such as the dinghy and lifejackets.

The new rules establish an apportionment method to determine the deductibility of expenditure associated with them. In this case the proportion of expenditure that is now deductible is calculated by dividing the number of days in which the asset was actually used to earn income by the total number of days the asset was actually used for both purposes.

In the illustration above, this would mean the owner would now be able to claim 38.5% of expenditure (25 days of income earning / 65 days of total use).

A number of other changes have also been made:

• Owners can opt out of the tax system if the asset has earned gross income of less than $4,000 in the tax year, this means no tax on the income however no deductions are allowed.
• when the income received from the business use of the asset is low (2% or less of the assets market value) any tax losses generated by the mixed-use asset cannot be offset against other income, but must be carried forward and offset against future profits generated by the same asset.
• in order to avoid an unfair advantage to taxpayers who choose to hold their mixed-use assets in a corporate structure the new rules apply to mixed-use assets owned by all forms of entities except companies that are not close companies (i.e. with more than five unrelated shareholders).

What constitutes private use?

There are three categories of private use.

The first is use of the asset by a natural person (an individual) who is either the person who owns, leases, licenses, or otherwise has control over the use of the asset.

The second is the use of the asset by a natural person who is associated with the person who owns, leases, licenses or otherwise has the asset. For example a close relative of an individual, a partner in a partnership, a shareholder of a close company, a trustee or beneficiary of a trust.

The third category is where the asset is used by a person who is not associated with the owner, but who pays less than 80% of the market value of that use but would exclude an asset that is rented by an unrelated person at a lower price for reasons such as:

• the asset is being rented in an “off-peak” or “quiet” period
• the asset is being rented for a longer period than it is usually rented for
• or the asset is being rented at a reduced price to establish profile or a market share.

Use by a person who falls into one of the above categories will constitute private use even if the person uses the asset along with others – such as when the owner stays in the bach along with some of her friends, even if the friends pay market rental.

Use by a person who falls into one of the above categories will also constitute private use regardless of any amount paid for the use.

When does private use not apply?

In the following situations private use does not apply when the owner uses the mixed-use asset to:

• earn income in the ordinary course of their business. For example, a person who owns a boat and operates a business that provides skippered fishing charters will not be treated as using the boat privately when he or she takes out the boat in the ordinary course of the business.
• carry out repairs caused by someone who rented the asset. For example, a bach might be rented to people who damage it. The owner might then need to stay in the bach to repair that damage because the owner lives some way away, and it will take more than one day to repair the damage. The use by the owner to repair the bach will not constitute private use.
• relocate it at the beginning or end of a period of hire, the relocation is necessary to enable the hire, and the income derived by the owner directly or indirectly includes an amount for the relocation.

References: www.ird.govt.nz keyword: mixed-use

Business is not all work and no play. You can also claim the cost of entertainment to build up business contacts, keep your employees happy or promote your goods or services as an expense. If it’s helping you earn your income, it’s usually deductible.

It should be clear when expenses are business-related or private. An entertainment expense is business-related if you spend the money to help your business earn income. If the expense doesn’t help your business earn gross income, it’s private and you can’t claim it as a tax deduction, even if you paid for it out of your business account.

50% deductible entertainment expenses

Some business-related entertainment expenses are 100% deductible. Others are set as 50% deductible because they have a significant private element. Even if you think that the private element was more or less than 50% of the expense, you can only claim 50% of the expense as a deduction.

In general, any entertainment away from work or out of usual work hours has a private element.

If you provide entertainment that’s only 50% deductible, you can only deduct 50% of any “supporting” expenses. For example running costs, repairs and maintenance for corporate boxes, holiday accommodation and recreational boats, hire of crockery, glasses, waiting staff and music.

Entertainment expenses and FBT

An entertainment expense where the benefits are enjoyed or received by employees may be subject to FBT. If it’s a business-related entertainment expense which is only 50% deductible, it isn’t subject to FBT. But there is an exception. FBT will be payable if the employer provides the 50% deductible entertainment and the employee can choose when and where to enjoy the benefit, or the benefit is enjoyed outside of New Zealand, and the benefit is not provided in the course of the employee’s employment duties.

100% deductible entertainment expenses

Some business-related entertainment expenses might look as though they are only 50% deductible, but specific rules mean you may be able to claim 100% of the expense. You need to check the rules carefully when there’s a mix of situations which have different rates.

Food and drink while travelling on business

If you or one of your employees buys a meal while travelling on business, the cost is 100% deductible. But you can only deduct 50% of the cost of food and drink consumed if the travel is mainly for the purpose of enjoying entertainment, or at a meal or function involving an existing or potential business contact as a guest.

Food and drink provided at a conference

You can deduct 100% of the food and drink you provide at a conference, education course or similar event that lasts for four consecutive hours or more (not counting meal breaks). If the conference is mainly for the purpose of entertainment the expenses are only 50% deductible.

Promoting your business, products or services

If you supply entertainment to promote a business or the business’s products or services to the public, you can deduct 100% of the costs. But you can only deduct 50% of the costs if the business contacts or employees of the business being promoted have a greater opportunity to enjoy the entertainment than the general public. 

Secondary promotion costs

You can claim 100% of entertainment expenses which only form a secondary part of a trade display or function held to promote a business. To claim 100% of the cost of this expenditure, the function must be open to the public. A trade display does not need to be open to the public to claim 100% of the secondary expense.

Freebies

You can deduct 100% of the cost of freebies promoting your business. You can only deduct 50% of the cost of freebies you give employees or people associated with you.

Entertainment for review

Entertainment which you provide to someone who’s going to review it for publication (eg, in a magazine, newspaper or on a website) is 100% deductible.

Entertainment as a business

If you provide entertainment in the ordinary course of your business at market prices or in an arm’s-length transaction, you can deduct 100% of the entertainment costs.

Entertainment supplied for charity

You can deduct 100% of the cost of entertainment you supply to the general public for charitable purposes.

Offshore entertainment

Entertainment enjoyed or consumed outside New Zealand is 100% deductible. Note that New Zealand includes the waters around New Zealand.

Claiming for reimbursed entertainment expenses

An employee who pays for an entertainment expense upfront may get an allowance from their employer to reimburse them.

Tax-free allowances

If an employee pays for entertainment that’s 50% deductible, eg, a meal for a potential business customer and you reimburse the employee with a tax-free allowance, you can deduct 50% of the allowance. A tax-free meal allowance paid to an employee working overtime is 100% deductible.

Taxable allowances

You can deduct 100% of any taxable entertainment allowances you pay your employee.

Promotions

You can deduct 100% of expenses in promoting your business. But, if you receive an extra benefit, as are result of that promotion you have to deduct 50% of the value of the benefit from your expense deduction.

Employee contributions

If you provide entertainment to an employee, and they contribute to the costs, you reduce your expense claim by the amount of the contribution.

Source: IRD Guide to Claiming Entertainment Expenses

Summer is coming, the pohutukawa is about to bloom, the beach beckons – but if you’re shutting up shop for the Christmas holidays, make sure your business is also ready to take a break.

This checklist is a good place to start. You might find you have other tasks to check off for your own business. Print this out – or copy it into a new document – to tick off tasks as the festive season approaches.

Premises

• Check your insurance is up to date so it’s valid over the holidays.
• Test smoke alarms and replace batteries if necessary.
• Let your landlord or property manager know when you’ll be away.
• Turn off heating, lighting, appliances and computer equipment.
• Clean out perishable food from the fridge.
• Give indoor plants an extra good watering (or take them home if you’ve got green thumbs).
• Put the rubbish out.
• Notify businesses that regularly deliver to you of your closedown dates, eg the water cooler company and the sanitation equipment company.
• Put a hold on any newspaper deliveries.
• Notify the office cleaner of closure dates, and consider organising a thorough clean while the premises are empty.
• Order supplies needed in January in time, and ensure delivery isn’t during your closedown.

Finances, leave and pay

Make sure you have enough funds in your business account to cover automatic payments for salaries and other regular bills.

Ensure all your tax requirements (GST, PAYE, student loans and other employer deductions) are in order if they have to be filed during your holiday.

Calculate holiday pay ahead of time.

Give employees 14 days’ notice if you have an annual closedown, eg the office or workshop closes over Christmas and no one is to work.

Clarify with staff what their leave breakdown is – what’s compulsory leave and when they’re due back at work.

Clients and suppliers

Tell clients when you’ll be closing and reopening – post this on your website, in out-of-office replies, on your answer phone, and if appropriate on the front door of your business premises.

• Pay your suppliers’ invoices.
• Send out your own invoices.
• Share emergency contact details with staff and clients who might need them.

And here’s a reminder of those upcoming public holidays:

25 December 2015: Christmas Day (Friday)

26 December 2015: Boxing Day (Saturday)

28 December 2015: Boxing Day observed for staff who don’t usually work on Saturdays

1 January 2016: New Year’s Day (Friday)

2 January 2016: The day after New Year’s Day (Saturday)

4 January 2016: 2 January holiday observed for staff who don’t usually work on Saturdays

Source: http://www.business.govt.nz/

There is no minimum period of time an employee has to be employed to become entitled to a public holiday and it does not make a difference if an employee is classed as casual, part time or full time.

All employees would be entitled to be paid for a public holiday if the public holiday falls on a day that would have been an otherwise working day for the employee. This means, but for the day being a public holiday the employee would have worked on day concerned. In other words, if it was not a public holiday, would the employee have been working on that day? If the answer is yes, they would be entitled to have the day off on pay; if the answer is no, they are not entitled to observe the public holiday.

What is an employee’s entitlement if they work on a public holiday?

Under the Holidays Act 2003, if an employee works on a public holiday, the minimum payment they should receive is time and half for the hours worked on the public holiday. For example, if an employee normally works 8 hours a day, but on a public holiday they only work 2 hours, the minimum payment they would receive for the day would be 2 hours at time and a half. This applies to all employees – wage and salary earners alike. Therefore, if the employer asks the employee to work on a public holiday, they should act in good faith and explain how this entitlement works to the employee so that they are aware of what they are agreeing to.
If the public holiday the employee worked on fell on a day that the employee would otherwise have worked even if it was not a public holiday, they would be entitled to an alternative holiday (a day off on pay at another time) regardless of how many hours they worked on the public holiday.
An employer can only require an employee to work on a public holiday if it is written into the employee’s employment agreement and the public holiday falls on a normal working day for the employee. In all other circumstances, the employer would require the employee’s agreement to work on a public holiday.

If I work a shift that spans two days, what are my public holiday entitlements?

Generally it is accepted that a public holiday runs from midnight to midnight. Therefore, if an employee works on any part of that calendar day (that is a public holiday) they are entitled to time and a half for the time worked on the day, and an alternative holiday (if the day the public holiday falls on would otherwise be a working day for the employee).

As an alternate option to the measures described above the Holidays Act 2003 allows employees working shifts that span two days to transfer the public holiday, by agreement with their employer, so that the public holiday covers one whole shift. The ‘day’ a public holiday is transferred to must be a period of 24 hours that begins or ends on the actual public holiday and includes the whole of a shift the employee is due to work.

When is an employee entitled to an alternative holiday?

Under the Holidays Act 2003 an employee is entitled to an alternative holiday if they work on a public holiday that is an otherwise working day for them. For example, if an employee normally works Mondays, Wednesdays and Fridays and they work for 1 hour on Easter Monday, they would be entitled to a full day off on pay at another time (an alternative holiday). This is because Easter Monday is an otherwise working day for them. This provision includes employees working shifts and some employees on call. Both types of employees get the full day off, even if they only work for a small part of the day.

There is no entitlement to an alternative holiday where an employee:

• Works on a public holiday and that day would not otherwise be a working day, or
• is on call on a public holiday but is not required to restrict activities, or
• is only employed to work on public holidays.

What should an employee get paid for an alternative holiday?

An employee receives their relevant daily pay or average daily pay for the day taken as the alternative holiday. Payment for an alternative holiday, depends on when the employee takes the day off, it has no bearing on how many hours the employee actually worked on the public holiday.

The alternative holiday can be taken at any time mutually agreeable to the employer and the employee.  If the employer and employee cannot agree when the alternative holiday is to be taken, the employer may determine the date. The employer must have a reasonable basis for choosing when it is to be taken. The employer must give the employee at least 14 days’ notice of the requirement to take the alternative holiday.

If an employee does not take their alternative holiday within 12 months of becoming entitled to the alternative holiday, the employee and employer can agree for the alternative holiday to be exchanged for payment. In this instance, the payment for the alternative holiday is to be agreed between the employer and employee and must be paid as soon as practicable once the agreement has been made.

Alternative holidays do not expire, therefore, any alternative holidays that are outstanding when an employee’s employment ends, these are paid at the employee’s relevant daily pay, or average daily pay if applicable, for their last day of work.

Source: NZ Department of Labour Frequently asked questions

The festive season is the busiest time of the year for many businesses, but it can also be really challenging.

The retail and tourism sectors are set to ring to the tune of jingling tills. But renovators and hairdressers will also be busy with last-minute makeovers, and mechanics servicing or fixing cars in time for holiday trips.

The rush is already starting for some firms and, with just weeks until Christmas, owners need to prepare now to seize the opportunity. There are also special challenges amid the festive cheer, including managing stock, staff, and cash flow through big peaks and troughs in demand, while providing for holiday pay and the provisional tax bill due for many in mid-January.

Here are some tips to make it a festive season for your business:

Get planning

Planning is the key to maximising sales.

Stock up to sustain your business into the New Year. Many suppliers shut down over Christmas; double-check your stock will be delivered when you need it.

Brush up on customer service. Holidays and Christmas shopping are stressful for many people. Support your staff by offering customer service refresher training, and revisit your disputes resolution and customer credit policies.

Maximise staff resources for the spike in demand. Write a Christmas roster. Consider hiring temporary staff. You could offer extra hours over the New Year period to cover staff leave and holidays.

Gear up for sales

If your turnover rises, you’ll want to maximise sales while managing demand and supply. Here are some proven ways to boost sales:

Make it easy to buy from you. Customers will want speed and convenience. Consider expanding hours over the festive season, offering flexible payment options, and posting special offers on your website. If your site doesn’t show up-to-date contact details, opening hours, and a good description of what you offer, fix that now!

Pull in new customers. Regular customers are great, but new ones can become new regulars. Think about improving your business signage, designs, and logo; offer free or reduced-rate shipping for online sales; or after-sales support, such as three free services when you sell a bike.

New products or services.  Think about your product range. Do you mainly sell big ticket items, or do you stock a range of products for a variety of budgets? You could boost sales by bundling bigger items with accessories at a discount. For example, if selling smart phones you might offer a screen protector, case and car charger at a discounted rate.

Manage cashflow

The holidays can be a cash flow rollercoaster. Sales often peak with the merriment, followed by a hangover as revenue slows in the New Year. Think about the seasonal effect on your turnover and costs, and manage your cash flow carefully. Last year’s figures should give an idea. Put together a cash flow forecast to help manage your spending.

Use the downtime

If you hit a New Year slowdown, don’t despair. At other times you probably crave time to put back into your business. While customers are away, use downtime to plan for repairs, renovations or makeovers. Think about planning, product development or future development. But also allow time to put your feet up – you deserve a rest and it’ll help recharge your batteries for another busy year!

Source: http://nzbusiness.co.nz/

Your time is best spent on growing your business and doing what you do best.

Making the most of your time and energy has never been more important. Cloud based programs that can be integrated together to create one seamless system give you more of both while managing the nitty-gritty of your business.

Our philosophy at Accounting One is that owning or running a business should be enjoyable.

Your bookkeeping, debt collecting, scheduling, customer details, can all be managed using remote technology so that your smartphone or tablet becomes an office that you can hold in the palm of your hand.

Xero
Manage your accounts, invoices and payroll with ease and convenience.
Xero combines everything you need for your accounting and payroll in one simple, easy to use program. With Xero you have the power to print and email instant invoices and quotes on the spot and even have the ability to have clients sign off on contracts and jobs on your tablet or smart device. Track your business performance, create budgets and create reports to assist with financial forecasting.

Receipt Bank
Eliminates the folder of crumpled up receipts and invoices by allowing you to upload a photo of the document from your smartphone or tablet while you’re on the run or you can copy and paste from emails for your paperless accounts. Receipt Bank extracts the key information from your bills, receipts and invoices, removing the need for manual data entry. Receipt Bank can then publish the data to your accounting software or it can be downloaded as a spreadsheet or used to create expense reports.

WorkflowMax
A client relationship and job management tool which includes timesheets, reporting, project tracking, invoicing and job monitoring. Track leads, proposals and sales to ensure your sales team are performing at their peak. Compare estimated and actual costs of jobs and keep account of the time your team spends on each job.

Debtor Daddy
Identifies invoices coming due for payment, or those that are overdue according to your accounting software, and automatically sends reminder emails to clients. You are able to set the frequency for sending the reminders and customise the emails to show the invoice details you want, including payment terms and payment options to remove any roadblocks in getting paid.

Timely
Timely is an appointment and booking management system. Organise your business, team & clients and save time with online bookings, automated reminders & daily administration tasks. Integrates with Xero so your client database is readily accessible. Not only will it help keep you and your team on schedule, but you can also keep track of client’s special days such as birthdays and send them a personalised message.

Accounting One is the best point of contact to help you use all this information to your advantage. As business operators and/or owners, it gives everyone vital insights into what’s working – great, you can keep doing that or what’s not working – let’s change or stop that immediately.

For more advice on setting up systems to help you grow your business and enhance your business performance contact Accounting One today for a complimentary Cloud Consultation.

What does it take to succeed? It takes more than you think to survive and thrive and running your own business is not for the faint hearted. After the initial excitement starts to diminish, business owners swiftly realise that for survival you need to build great relationships, solid teams, systems and processes.

Teamwork, Discipline & Accountability

Like any goal you set, you need someone to hold you accountable. Good accountants are like good personal trainers. They are there to help you with goal setting – working on your ideal “weight”, they’re there to assign “exercises” and they are there to measure results.

To grow in business you need discipline and direction to help you set objectives and goals, and most importantly, be held accountable. How else do you measure success? It’s one thing to hand over your financials; it’s another when you have a team to work alongside you picking up on what’s going wrong, what’s going right and then helping you do something about it.

Opportunities are everywhere but if you’re not focused and you’re not disciplined to stay on track, it’s easy to lose your way. With good accountants, not only do you get sound advice and support, you get fresh business ideas. These fresh business ideas could relate to new products or services you could offer, it could advise you about your organisational structure and a whole range of options to address. There is no one size fits all so it pays to listen to the experts.

Good accountants, like the team at Accounting One, having years of experience around systems, processes and ideas. Walking into a business growth consultation is half therapy and half business planning. Plenty of friends and family will have ideas – you can guarantee that, but if they’re not based on realistic data – you’re really just wishing your ideas work.

Accountants, who are also your financial mentors, understand the day-to-day running of a business and how to drive successful outcomes. They have the capability and the access to ensure your business will thrive. Yes, there is number crunching involved, but that number crunching is appraising your business performance. Without it, you’re really blind.

Financial Mentoring? – How We Pay It Forward

Mentoring businesses is sharing business wisdom and the Accounting One team says it’s the perfect opportunity for them to “pay it forward”. This approach enables them to help businesses map direction, set goals, develop influential networks and relationships. This is key in any successful business whether you are as big as Google or as small as a sole trader.  You never know where collaboration and collective thinking can take you so it pays to listen and listen to the right people.

Don’t go it alone in business, being “mentorless” is not nice. What is the most challenging question about your business growth you have on your mind? Write it down and then ask us at Accounting One.

The works rolling in, the boys are busy but why is the cash flow still not improving? You’ve won a few big jobs lately but the profits were really tight, where does it all go? What happens when I am hit with a bad debt just when I’m about to pay my subbies?

These are real problems that those in the building trade are asking every day. There is so much hype around at the moment with the building trade taking off but risk is always there when it comes to running and owning your own business. Dealing with that risk is a top priority.

According to a recent article in the NZ Herald your business is most at risk when it is going through a growth “spurt”.

“Unfortunately people don’t understand the cashflow demands of a growing business. It’s when you’re actually most at risk,” Specialist Trade Contractors Federation president Graham Burke told the Herald recently.
That’s because if a firm is growing and a debtor doesn’t pay, it has higher wage or supply costs to deal with but no cash to pay. “When you’re growing you need cashflow in advance, it’s when people come into grief. It’s kind of the reverse of what people think – when it slows down your cashflow catches up for a while,” he said.

It’s important through all phases of your business from start up to exit planning to have good people and good systems. Good accounting systems rely on good accountants who can translate your financial statements to help identify areas that need action. It could be a review of margins and costings or it could be wages and expense analysis.

Money management reports will tell an accountant what jobs are making money or if your margins are too squeezed. They are qualified to tell you what jobs are profitable, they can help you improve cash flow and offer sound strategic advice. It’s the solid foundation that will keep your business running.

Reporting on objectives and goals can be achieved in real time and you don’t have to trawl back over messy and unreadable paper work to try and work out a) how long did we really spend on that job b) was that job profitable or did we actually lose on that one c) what jobs pay the best and therefore which jobs should I target.

It’s imperative to work with great people and great systems if you want to keep your head above water and get ahead. We know health and safety talks a lot about – eliminate, isolate and minimise. When it comes to making money you need to apply the same to eliminate any risk to your business.

Management buy-outs are a great opportunity for a senior management team to become part owners of a business, but each shareholder will have their own set of goals.  It’s vital that a succession plan is put in place very early on in the game to create transparency and trust.

It’s easy to identify those shareholders who have one eye on the business and the other on the door!  They are the quick thinkers, possibly the more risk taking members of the group, who may want to buy up, merge and acquire at a faster pace than the other members are happy to do.

Those other members probably see themselves as long-term “employees” of the business, as well as shareholders.  They like job security that part business ownership gives them.  There is no right or wrong, though cracks can occur when a power struggle starts to take place.

For succession planning in this situation to be a success, a likely recommendation is to pull in an independent third party or parties to act as advisories.  The aim is to ensure both parties achieve a beneficial outcome that they are all happy with.  For those who want to build and sell up and get out, having independent advisors negotiate and facilitate the process allows for a smoother transition period.

For those who wish to stay on board, then advisors can assist with capital management and strategic planning to allow for the continuity of the business. Even for those who want to stay in the business it’s key to identify early on strong managers who can at some point take on greater responsibility.  Training and development for these managers is a wise investment for any sustainable and profitable business.

Succession planning isn’t just an exit strategy it can also be a time to grow and develop a business, so staff, shareholders and customers all get the best deal.  Whether you want to retire or just move on to something new, the only way to successfully achieve this is to plan ahead.