Help is available to those struggling after the devastating week in NSW

It has been a rough week of weather for parts of New South Wales (NSW) and we all know someone who has been affected.   So as the week comes to a close we wanted to reach out with some information that may be of help to you, or may help you assist a neighbour, friend or relative who has been affected.Here are some of the things you should consider if you have been affected by a natural disaster.

Are you eligible for natural disaster assistance schemes? The government has emergency assistance grants and loan schemes available for

1) People facing personal hardship and distress The Ministry for Police and Emergency Services can provide disaster relief grants to eligible individuals and families whose homes and essential household items have been destroyed or damaged by a natural disaster. Find out more

2) Small businesses that meet eligibility criteria Loans of up to $130,000 are available at a concessional rate to small businesses affected by disasters and which meet certain eligibility criteria. This finance is available to those unable to obtain assistance through normal channels.   Find out more 

3) Primary producers that meet criteria for loans and transport subsidies Loans of up to $130,000 are available (subject to certain eligibility criteria), at a concessional interest rate for those in urgent need.  Transport freight subsidies of up to 50 percent are available to help with the carriage of livestock and fodder to help primary producers  Find out more

These schemes are all subject to eligibility.

Have you notified your insurance company of an intention to claim? If you intend to claim on an insurance policy, it is important to start enacting this process as soon as possible.  Insurance brokers and companies provide extra support for the high volume periods and often prioritise on a first come basis. Further, there may be records and information you need to collect and retain to ensure your claim is valid and maximised. For example if you have suffered a business loss and your business insurance covers “loss of profits” or “business interruption” it may be necessary to capture information about the hours of staff or loss of income during and following  the disaster. Such information may be more difficult to collect afterwards or not having it may impact the amount paid under the policy. For property damage it is important to understand the process required to be followed by your insurer to ensure costs are covered. For example you may need to get a certain number of quotes for repair work or use certain providers to have the work done in order for your insurer to reimburse you.

Seek out programmes that might be available to help. Many financial institutions and organisations are releasing programmes to help their customers.  We have already been contacted by a number of banks, as well as Chambers of Commerce and Government bodies.  Our team is across many of the programmes that are being offered and will continue to monitor this space as it unfolds to help people in their local areas. Please contact us for assistance in understanding what help is being provided.

Do you need help getting your business, home, family or charity through this period?  People who are struggling might not have the tools, skills or equipment they need to lodge claims, manage issues or obtain help that will get them back on track faster.  Our team is just one call away for someone you can trust to be a second set of eyes or hands at this time.  Whether it be a sounding board, processing payroll while systems are down, helping you apply for assistance or insurance or longer term planning to help you or your business recover from this event, we are here to support you.

Most of all, we want you our clients and friends to know that if there is any way we can help you at this time, to please reach out to us.  Natural disasters and the aftermath can be soul destroying, and there are plenty of hands and minds here to put to work on solving any issue, personal or business that you might be struggling with

Succession Planning for Professional Services Firms

It takes years to build up a strong, partner-led professional firm, but many businesses can destroy this value quickly by failing to plan for the succession of senior staff.

What is your plan?

Have you considered how you will exit your firm or manage the exit of one of your partners should they get ill, seek retirement, or face an unexpected change of life?

Have you identified the likely successors for your role? What is in place if one of the principals is removed by illness or death? Will your business have ongoing viability if you are no longer part of the team?  Do you know what your firm is worth?  What will be the taxation consequences of a sale of your equity?

If you can’t answer these questions you could be exposing your business to risk should you have a principal of the business retire, resign or confront health issues.

Often professionals are so busy working in the business they don’t work on the business and succession usually isn’t an urgent consideration. It is, however, important to work through the process and develop a plan that will deal with the succession of your business in all circumstances, including an unplanned exit.

Considering your succession options

Consideration should be given to the outcomes for your business if you were to get ill or have to step away from the front line.  Then, once understanding the impact, you should consider the options available for succession and the issues and merits of each option.

Where the firm has multiple principals there should be equity/shareholder agreements in place which identify the roles and responsibilities of the parties can also identify the steps to follow to buy out an exiting party.

It should also outline the method to value the equity interest and what terms will apply to the payment.

A buy/sell agreement that deals with unplanned exits is often funded by an underlying insurance policy that is triggered when the events in the buy/sell occur.

It is better to put these documents in place when there is no immediate requirement to negotiate an exit as they can then be done with no specific agenda in mind.

Business Structure

Other considerations for the succession plan is reviewing your business structure to allow for easy entry and exit of parties and access to any asset protection and taxation concessions where available during operation of the business and in the event of sale.

Financial Review and Improvement

There should also be a financial due diligence to identify the areas for improvement in the practice, including financial reporting programs, growth planning, profitability improvement, systems development and risk management.

When these areas are improved they enhance the value of any business and will result in greater profitability of the business and a smoother transition.

Identifying your successor

It is also important to consider whether there will be an external sale of the business or whether a potential leader can be identified within the current team.

The knowledge and experience that resides in a principal often forms a substantial proportion of the firm’s intellectual property and capital. That knowledge and experience needs to be passed on to potential successors.

Internal succession may also need to be backed by appropriate recruitment of staff who aspire to being a principal, leadership and management programs to provide development, and growth in the practice that facilitates progression of team members to principal.

Well planned succession

Ultimately succession of a principal can be best managed where the business is transition ready, there is a process in place to manage an exit and the process is clear for all parties involved.  That way, when succession becomes an issue, it is not a reason for unnecessary conflict or stress.

 

Debbie Matthews is an Associate Director of Business Services and Taxation at Prosperity Advisers. 

 

Derisking your Business Partnership – Some simple but important steps

Running a business with others whether through a company, trust or partnership is not something that many people step into lightly.  Most get to know their business partners for months or years before they go into business, building trust, rapport and structure around them as they go. 

So it makes sense that many partnerships are now insuring against the unexpected exit of a partner from the business  with Buy/Sell insurance that allows remaining stakeholders to buy a partner out in the event of specific events like death and disability.  

It is an important element of succession planning in partnerships, where individuals rely on each other to run their business and deliver their services or products to the market.

Take for instance the business run by Mark, Jeff and Drew, partners in a firm that sold high profile residential property.  The real estate agency had a premium referral based clientele and a superb reputation that enabled them to live a good life.  Despite their success, the partners had never taken the time out to build a succession plan, put business agreements or insurances in place.

Sadly, Jeff’s lifestyle got the better of him, and he died suddenly and unexpectedly from a heart attack.  His wife, Kathy, who had never really been interested in the business since she left to have children 10 years ago decided return to work again, demanding to be treated like and equal partner by the other two as she was a beneficiary of Jeff’s 33% shareholding.

It soon became obvious to Mark and Drew that Kathy was out of her depth.  Clients who had previously worked with the agency were complaining, two of their best staff resigned and the agency was denied an important regional contract they had held for 12 years.

The hostility and resentment between Kathy  and Mark and Drew grew to the point where Lawyers became their best way of communicating.

The situation was stressful for everyone in the office, and it had virtually destroyed the value of their once buoyant and successful business to the point where it was virtually worthless.  When one of the senior staff left and set up an agency down the road in competition with them, they knew their run was over.

Had Mark, Jeff and Drew sought advice on succession planning their partnership and implemented buy/sell agreements and insurance this situation could have been avoided altogether.  When Jeff died, funding would have immediately triggered to buy Jeff’s ownership share from his estate.  The inclusion of staff incentives schemes in their succession plans may also have kept staff in the business, minimizing the risk of them setting up in competition with the firm.

Are you in a business with others?  What should you do?

  • Seek professional advice to draft a buy/sell agreement
  • Put in place buy/sell insurance
  • Draw up an effective succession plan that take into consideration sudden and planned exits
  • Ensure your buy/sell agreement is regularly revised and amended as circumstances change.
Image source: Flickr: o5com