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What Happens to Your Business When You Move On?

Who will continue your legacy and is there even a succession plan in place at all?

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According to a recent survey, family businesses control a significant portion of Africa’s economy. Unfortunately, the survey also shows that most African family businesses do not survive past the founder’s generation.

How do you ensure that the family business you have built up from grass roots to the success it is now, does not fall to ruin and destruction when you pass on?

The Ackerman family business seems to be getting it right. Starting out with three grocery stores in Cape Town, they now have around 800 stores across the country and are the second largest in the country.

We-recommend-tickWe recommend: Build your Business Legacy through Succession Planning

More than that, the business is still a family business, with the Ackermans owning 53% of Pick n Pay’s shares, and Raymond Ackerman’s children fulfilling several senior positions within the business well after his retirement.

What are the obstacles to succession planning?

PriceWaterhouseCoopers recently released revealing statistics that indicate that only 13% of family-run businesses have succession plans implemented. Take note of the word “implemented”.

You see, most businesses have a succession plan, but too often it is merely a thought or an item on a ’to-discuss’ list, rather than a process that has been put down on paper like any other imperative business practice.

So where are family businesses getting tripped up, when it comes to succession planning, and how are these areas of difficulty remedied?

1. Alignment of family interests

Handing over the reins of your business to the next generation can be an emotional and sometimes difficult task.

As a business owner, you want to know that the best interests of your business are considered and aligned with those of your successor.

In the same vein, you will also be looking to the business as your source of retirement income. So naturally, the alignment of your family interests would be a key focus area for you.

2. Balancing of financial returns

Another area that often causes difficulties in succession planning is that of buyout agreements and financial returns. The retiring generation is likely to look to a number on a balance sheet as a way to view their interest’s true value.

What smaller family-owned businesses are often not aware of is that the business should have the concept of an earnings capitalisation model upon which to base its true value. 

3. Interfamily disputes

In a family-owned business there is the likelihood of one family member’s interests not aligning with another’s.

Certain situations like the divorce of a family owner or a death in the family may add fuel to the flame, especially if the surviving spouse holds voting rights or company stock, but is not actively involved in the company.

We-recommend-tickWe recommend: SMEs Must Have a Succession Plan

How do we ensure we pass on our legacy to the next generations? 

succession-planning

1. Establish the succession plan

Putting the succession plan in place is the most important step to ensuring that your business is passed on according to your desires.

Identify your successors. This step includes selecting both managers of the company and owners of the business. Once these positions are identified, you should then identify active and non-active roles for all involved family members.

Thereafter you should identify any additional supporting roles required for the successor from family members.

2. Create a business and owner estate plan

Once your succession plan is in place, you will need to meet with the new owner/business to address the taxation implications upon sale, transfer of business ownership, death, or divorce.

Further to this you will need to review your business estate plan in order to minimize any taxes and prevent possible delays in stock transfers to remaining owners or spouses.

You will then need to arrange a buy/sell contractual agreement that minimises tax, and is fair and reflects the business’s values.

3. Create a transition plan

It is also recommended that you consider various transition options, be it an outright purchase, a gift/bequest or a combination of the two.

If it is decided that the business is going to be purchased, it is important to consider your financing options. These could include obtaining financing from an external party or self-financing from the owners who are retiring arranged on a deferred payout basis.

Thereafter you will need to establish a suitable and reasonable timeline for the implementation of your succession plan.

4. Invest in a retirement plan and insure your worth

As with career employees, you will want to ensure that you invest in a retirement plan, life insurance and even personal disability insurance – all of which will protect you and your family when it’s time, forcibly or not, to step away from your business.

It’s relatively easy to address retirement planning, because we all hope to get there and, more importantly, want to enjoy it. But life and disability insurance are equally important for the small business owners, because they protect you and your family, should the worst happen.

We-recommend-tickWe recommend: How Smart Managers Drive Profits

It’s best to chat to an independent financial advisor about your investment goals.

You may not view succession planning as something that should be top of the agenda, but that’s a mistake.

It is not only a question of who continues your legacy, but also a question of if there will be anyone to succeed you at all.

To be blunt, if you don’t have a succession plan in place – consider following this link: SARS guide to closing a business.

Kieron McRae captains Carrick Wealth's Business Development Team, and brings with him both insight and extensive experience in numerous sectors of the economy, both private and public. Born, raised and educated in South Africa, Kieron has more than 20 years of management consulting experience in strategy and corporate culture alignment. He has worked extensively throughout Sub Saharan Africa as well as in the Middle East, Australia, the UK and Canada. He has played an advisory role to many organisations, consulting at every level from boards and executive teams through all the ranks right down to "blue collar" manufacturing teams, applying clear-minded strategic vision and big picture thinking at every point along the way.

How to Guides

(Podcast) Phone Calls Often Solve Email Problems

Irate customers can become your most ardent supporters, but it’s important to treat your clients like people. People like people, and phone calls are more personal than emails.

Nicholas Haralambous

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Emails solve problems – but they also create them. When a real problem arises in your business, is an email the best way to solve it, or should you pick up the phone and give your customer a more personal experience?

Irate customers can become your most ardent supporters, but it’s important to treat your clients like people. People like people, and phone calls are more personal than emails.

Listening time: 3 minutes

Related: (Podcast) Being An Entrepreneur Is Painful

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Company Posts

Why Choose ISO 90012015 As A Starting Point For Your Business

Implementing all elements of the standard can help your business, but what parts of the ISO 9001:2015 standard in particular should prove to be of most beneficial for yours? We’ve listed a few below.

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Ask for any Entrepreneur’s to-do-list, ISO Implementation and certification may not always be at the top of it. Businesses are constantly faced with financial, operational and socio-economic pressures, while business owners must make decisions on projects related to “cost vs the benefits”. But here’s why ISO 9001:2015 is a reasonable investment.

If your businesses is certified under ISO 9001:2008 you had three years to transition to ISO 9001:2015, if you don’t transition, your certification will become redundant. The three‑year period started on the date the new standard was published in September 2015. Don’t wait, your Day 1 of 365 days starts now.

Related: How ISO Certification Can Help You Access Market Tenders

Implementing all elements of the standard can help your business, but what parts of the ISO 9001:2015 standard in particular should prove to be of most beneficial for yours? We’ve listed a few below. It may also protect your business (against big business)

How can ISO 9001 make the difference for my business?

Start by viewing the costs as an investment that allows you to better assure your clients, improve your productivity and raise your ability to compete.

Your certification to the standard, can attract reputational benefits and establish a ticket to levels of business that non-certified companies certainly cannot obtain. This may be the most practical time to implement ISO 9001 for your business.

As the full process can take up to 6 months, you need time to plan and execute your transition to the new standard and it will require work, commitment and changes to the habit of doing things.

This is why it’s vital to begin early and hire consultants with a 100% certification record with any SANAS (South African National Accreditation System) or International Accreditation Body. It gives the guarantee and expertise you need.

iso-process

Your 6 steps to getting ready for ISO 9001:2015

1Establish Processes

  • Documenting and Implementing processes in your business can yield great benefits as your business grows. Setting common processes in the beginning will result in consistency in the products and services, this sets a sound foundation for expansion and future growth.
  • Save time, cost, and ensure delivery. This takes place when you have new employees and point them to processes that are well established and well documented.
  • It allows your staff to feel confident in doing their job, knowing there is a process to follow and with the help of the Document Control Process, you can always re-engineer the process to adapt to change, this results in Continual Improvement.

2Formulate PDCA cycle (Plan-Do-Check-Act)

  • The fundamental basis of the ISO 9001 standard is based on Edward Deming’s PDCA Model. If implemented effectively it can benefit any type of business however large or small you are, it’s practical. The Method is also used by fighter pilots.
  • You build a culture of “careful planning, monitoring, and adjustment of actions” this speaks volumes to your employees, and your clients benefit in return.

3Increase your sales by using ISO 9001

  • By using valuable customer feedback, you build up information to monitor and review your client’s perception of your products and services, this feeds into a corrective action process, which results in a continual improvement to create relationships with existing clients and attracting new clients.
  • Most Tender Requirements from Government, Local and International Companies require ISO 9001 as a qualifier to their procurement process. This gives them the assurance that a Third Party Auditor is auditing an effective Quality Management System aligned to International Standard that has effective process control and will measure client satisfaction.

4Develop an attentive mindset to risk and opportunities

  • Risk and opportunities is the latest introduction to the ISO 9001:2015. This allows businesses to identify potential and current risks in their process and mitigate them before it’s too late, the fundamentals of a successful business.
  • By cultivating a culture where your team have a sharp eye for risk and opportunities will serve your business well.
  • Profits will be maximised while risks are spotted early and can be minimised.

5Take control of change management

  • As the saying goes, “Change is the only constant in the 21st century”. The inability to handle change and adapt accordingly is one of the main reasons that many businesses do not survive through the first two years of existence.

Related: 7 Steps To Achieving Our Higher-Level Goals

6Setting goals and objectives

  • Goals and objectives are key fundamentals of the ISO 9001:2015 standard, these are tools to assist in attaining your companies Vision.
  • When you get into the habit of setting, reviewing, and taking action against objectives, the end results is growth and driving improvement.

It is clear that implementing ISO 9001 can take your business to the next level that benefits startups to established corporates. We stress again the vital importance to begin early and hire consultants with a 100% certification record with any SANAS (South African National Accreditation System) or International Accreditation Body.

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Company Posts

How ISO Certification Can Help You Access Market Tenders

Want to leap-frog your competitors by building your business credibility?

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ISO Certification

2017 has been a challenging year thus far. A decline in exports, slower growth in private consumption and fixed investment has caused the economy to contract in Q1 and enter into its second technical recession since 2009. This means that it is now more crucial than ever to break away from your competition to survive in this economy.

The question we as businesses are all asking, is how can we become more competitive during these tough times?

The answer is ISO Management systems and certification.  The implementation process allows organisations to streamline their processes and benchmark to international standards that have worked for the likes of Toyota, Coca Cola, MTN SA and many more.

The ISO Certification gives your clients the national and international credibility that they are looking for, in you as a business.

What are ISO Standards?

ISO is not an acronym, it is derived from the Greek word ISOS, which means equal and is interpreted as The International Organization for Standardization, which comprises of various National Standards being superimposed into one International Standard. There are approximately 21500 ISO Standards, from Quality, Health and Safety, Information Security, Environmental, Energy and many more. (The International Organization for Standardization)

The ISO standards set a precedence for companies to create a Management System which comprises of Policies, Objectives, Processes, Risk Assessments and Procedures with the aim of being able to provide a consistent service.

The standards requirements can assist a one-man tuck shop to large corporates such as Google.

Think about it this way, when you buy a house, does your insurance company grant you a policy without an Electrical Certificate of Compliance? Do you buy a brand new laptop, mobile device or any other electrical device without a warranty or guarantee? Will you send your child to a hospital that does not have standards in place? Will you buy vegetables that have not undergone the necessary food safety controls?

We, as consumers, have all become cautious, hence the birth of ISO Certification. An independent body (Watchdog) such as the SABS, BSI, TUV, and Bureau Veritas conduct regular audits against your processes and the International Standard to create the assurance you are looking. How ISO Standards And Quality Management affects SMMEs

That is why your company must invest the time and money to implement the value adding systems with the right consultant. This in turn will provide your current and potential clients the assurance that you have the relevant processes in place to deliver what is required and will provide you with the competitive edge. You are not too small to become ISO certified.

Where do I start if I want to become ISO Certified?

where-do-i-start-if-i-want-to-become-iso-certified

ISO Management systems work on a four-phase approach to develop, implement, train and assist organisations through certification.

The following will give you an overview of how the process works:

Phase 1: GAP analysis & Identification of processes

  • GAP Analysis Audit on the choice of your ISO Standard
  • All Staff to undergo awareness training on the ISO Standard (Requirements)
  • Analyse & identify current systems (Policies, Objectives, Risks, Processes and Procedures) within the company and gather information.

Phase 2:  ISO Management System Development

  • ISO Management systems manual (Policies, Objectives and Mandatory Procedures)
  • Process documentation and Standard Operating Procedures
  • Risk assessments and tools to assist in Monitoring, Measuring and Analysing. 

Phase 3: Implementation

  • Coaching and change management of Top Management and attaining Leadership Values.
  • On the job training with all staff and workshops on the ISO Management Systems
  • Internal Auditor & Maintenance Training
  • Internal Audit, non-conformances, corrective actions and reviewing of risks
  • Management Review Meeting and Review of all Statistical Analysis.

Phase 4: Certification

  • Stage 1 Desk Study Audit with the Certification Body
  • Stage 2 Certification Audit, Non-conformances and Corrective Actions completed
  • Annual Surveillance Audits to justify continuous improvement.

ISO standards aren’t rigid rules, but rather a set of generic requirements and guidelines to what we as a business should be following.

It’s the basics of business, we tend to overlook the basics and focus on profits, which jeopardies our quality and service.

Your clients are becoming more advanced, better informed and their expectations are growing. Having ISO Management Systems provides organisations with the competitive edge over their competition, by gaining National/International recognition.

In fact, any organisation, whatever their size or industry sector can give themselves a secure future by introducing ISO Management Systems. Remember to look for management systems that can guarantee 100% certification with any certification body such as SABS, TUV, BSI, Bureau Veritas, DEKRA etc.

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