Succession planning in a South Australian family business

Most succession conversations in a South Australian family business start about 5 years later than they should, and usually for the same reason: the person who has to start the conversation is the person the whole business runs through.

Succession isn't a document you sign at the end. It's a set of operating conditions that either exist or they don't. Can the business trade for a month without the founder in it? Can somebody who didn't build it read the numbers? Is the work written down, or is it in a head? Are the customers loyal to the business or to a person? Those 4 answers decide whether a handover is a transition or a cliff. For the wider picture, the state of small business in South Australia sets out the shape of the market these businesses sit in.

One thing to be straight about first. ADL Business Coach doesn't deliver coaching and doesn't run successions. It's a matching service, and the coaching is done by separate, independent Adelaide coaching businesses. So what follows describes the operational job, not something sold from this page.

Succession is 3 handovers, not 1

Owners tend to treat succession as a single event with a date on it. In practice there are 3 handovers, and they almost never land together.

There's the ownership handover: who holds the business. There's the management handover: who makes the decisions week to week. And there's the relationship handover: who the customers, the suppliers and the staff actually ring.

Ownership is the handover families talk about, because it's the 1 with paperwork attached to it. The other 2 decide whether the business survives the change, and they're the 2 an owner can work on directly. Ownership belongs with your accountant and your lawyer, and it should stay there.

Pulling the 3 apart helps on its own. It lets a family agree that a daughter runs the business from March without having to settle the ownership question in the same sitting. It also exposes the common case where the next generation is handed the title and the risk without ever having been handed the decisions.

A handover that moves the ownership but not the relationships gives the new owner a customer list that still rings the old one.

The blunt test: a month away

Can the business run for a month without you? Not a fortnight while you're contactable on the mobile. A month where you're genuinely out of it, and nothing is stacked up waiting for you when you get back.

If the honest answer is no, the business isn't ready to hand to anybody, family or otherwise, because what's being handed over is a job with the founder's name welded to it.

The work here is unglamorous. Write down every decision that came to you in the last fortnight, then sort them into 2 piles: decisions that genuinely need the owner, and decisions that arrived out of habit. Most owners find the second pile is several times the size of the first. Each item in it needs 3 things in writing: who decides it now, up to what dollar limit, and what they do when it falls outside that limit.

Then you have to leave it alone long enough for the new decision-maker to get something wrong and recover from it while you're still there to see it. A successor who has never made a mistake in front of you is a successor who makes their first one alone.

Numbers a successor can actually read

An owner-run business runs on numbers that make sense to 1 person. Job margins live in a spreadsheet only the founder opens. Pricing sits in somebody's judgement rather than in a price list. The bank balance is the reporting system.

That holds up right until somebody else has to steer with it. A successor who inherits a business they can't read will either freeze or overcorrect, and both of those cost money in the first year.

Legible, in practice, means 4 things:

• A monthly report that somebody other than the owner produces, on a fixed date, showing revenue, gross margin, overheads and the cash position, with the same month last year sitting beside it.
• A price list that exists as a document rather than as a habit.
• A record of what each job type, product line or site actually earns, kept separately from what it turns over.
• Somebody other than the owner presenting those numbers out loud once a month, because presenting them is how you find out whether they're understood.

If the destination is a sale rather than a family handover, the same legibility work does double duty. What to fix before an Adelaide business goes on the market looks at it from the buyer's side of the table.

Work that only lives in a head

In a business that's been trading 20 or 30 years, a lot of the value is undocumented. Which supplier will do a rush order and which will just say yes and be late. Which customer pays in January every year and always pays. What goes wrong on that particular install. Why the price on that line is what it is, and what happened the last time somebody discounted it.

None of that is written anywhere. It walks out with the person.

The fix isn't a manual. Nobody writes a manual and nobody reads it. The fix is narrower: pick the 10 tasks that would stop or go badly wrong if you weren't there tomorrow, and write each of them as a short sequence a competent person could follow, with the exceptions listed underneath. 1 page each, no more. Then have the successor run them while you watch and say nothing.

Do 10 and most of the concentrated risk has moved. The rest tends to document itself once the habit exists, because the successor starts writing their own version as they hit gaps.

Who the customers are loyal to

Ask yourself which customers would still be here in 12 months if you weren't. Then ask how many of them have ever dealt with anybody else in the business.

This is where a lot of family handovers quietly come apart. The trade is fine, the margins are fine, and 6 of the 10 largest accounts were relationships with the founder personally. When the founder steps back those accounts don't leave in a week. They drift over 18 months, slowly enough that everybody blames the market instead.

The work is deliberate reassignment, started early. The successor goes to the meeting, then runs the meeting, then takes the call directly. The founder stays reachable and stops being the default. Done properly that's a 12 to 24 month job, which is exactly why it can't start the month before the handover.

Concentration matters here too. If a quarter of the revenue sits with a single customer, that's a live risk for the incoming owner whoever holds the relationship, and it's far better named out loud early than discovered late.

The conversation the family keeps postponing

The operational work is the easy half. The hard half is that a family business carries 2 sets of interests at once, the commercial and the personal, and they don't always point the same way.

The questions that get avoided are usually these. Does the person taking over actually want it, said out loud, without the founder in the room? What happens with the siblings who aren't in the business? What does the founder do on the Monday after, and what does the founder still get to decide? And what's the trigger: a date, an age, a milestone, or "when it feels right", which in practice means never.

None of those have a correct answer. They have an answered state and an unanswered state, and unanswered is what turns a succession into a dispute.

Timing is the other trap. Succession decided under pressure is a worse process than succession decided on a plan, and pressure isn't rare. What SA insolvency data says about an owner's own risk is a sober reality check on how fast a business's options can narrow. For families on the land the pressure often arrives with the season rather than with the calendar, which is why succession sits right alongside price and cash flow in the Adelaide Hills and Barossa squeeze.

Where this stops, and who the rest belongs to

Everything above is operational. It's about whether the business can be run by somebody who isn't you, and it's the part an owner genuinely controls.

The rest of a succession isn't operational, and it isn't something to work out from a website. Ownership structure, what a transfer means for the parties, what the business is worth, the agreements between everybody involved and anything with a statutory consequence belong with your accountant, your lawyer and a licensed adviser. The useful job before those appointments is getting the business into a state where the questions are short and the answers are cheap.

If that's the stage you're at, succession and exit planning describes the operational readiness work an Adelaide coach typically does with an owner facing a handover.

A last word on time. Nearly every item above takes 12 to 36 months to do properly, and none of it compresses because you'd like it done sooner. The owners who find succession straightforward are the ones who started it when they didn't have to.