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