Succession planning for business success!
Extracting value from 30 years of building a business: $8-18m over a 4 year Succession Planning program
Succession Planning is one of Gibsons’ core service offerings. We have helped position scores of businesses owners to retire, sell and otherwise leave their businesses in good condition. As insurmountable as some of the challenges may seem at the outset, the steps in this journey are often very logical. Gibsons’ consultants are adept and experienced at shepherding our clients to successful outcomes; helping them to exit on the best possible terms, often well beyond their initial hopes and expectations.
This case study is one such story.
At the time Gibsons were called in to look at succession planning for this client in the manufacturing sector, they had an annual turnover of $8-10 million with EBIT of 5-6%. Revenue was in decline and had been for some time. Key conditions relative to succession planning were:
- A third-generation family business; owner 65 years of age.
- Management team of 7; 3 members also over 65 and looking to retire.
- The business was highly reliant on the management layer and little development of the next generation of managers had taken place. Some of the key managers were micro-managing in their area resulting in a somewhat autocratic culture.
- No family members wished to take over – the owner’s children were not interested in the business.
- There were key roles missing from the management team, the most notable being that of a Financial Controller.
- Financial results were not typically shared and discussed amongst the management team.
- Human resource systems were not being practiced.
- There were no Customer Relationship Management (CRM) systems in place and little sales management of sales staff occurred.
- Key processes were not documented.
- The factory held a lot of under-utilised or unused equipment.
- There was no business plan in place.
Succession planning can take many pathways and individual perspectives and experiences of it differ. All of these issues were weighing heavily on the owner who had begun to doubt he could ever retire and extract the value that his family had spent three generations building.
This in turn created anxiety within younger members of the management team around their security within a business with an uncertain future.
Over the ensuing 3 to 4 years Gibsons worked with the owners to build a revitalised business with increased value, create a succession plan providing a future for the business and career paths for younger members of the team as well as exit strategies for the older members of the team and of course the owner. A range of activities were undertaken as follows:
A business plan was created that centred around identification and agreement on key strategies for revitalising the business and introducing succession preparedness:
- A growth strategy via acquisition of smaller competitors.
- Transition-to-retirement plans for key management.
- Mentoring key management staff to enable them to transition to retirement and train new incumbents.
- Formalised Management Team structure and processes.
- Operations were reviewed and rationalised.
- Mentoring of new managers.
- Acquisition of a smaller competitor.
- Implemented Transition Plans.
- Replaced Production Manager.
- Transitioned financial role from CEO.
- Implemented human resource processes including skills management and performance management processes to systemise roles, build an accountability structure and develop people.
- Documented key processes.
- Implemented CRM and Sales Management Processes to better manage business development and customer service.
- Acquisition of two smaller competitors as per growth strategy.
- Sourced General Manager to allow the CEO to semi-retire.
- Transitioned CEO role duties to General Manager.
- CEO semi-retired.
- Marketing program to grow attractive market segments and position the company as the leading Australian manufacturer in those sectors.
These actions led to the creation of a much larger and more profitable business. Gibsons helped them grow to $18-20 million turnover at better than 10% EBIT to sales with transition to a new management structure and clear succession for key management and the owner. Gibsons are still relied on to guide the business to assist with growth and success into the future.