It wasn’t raining when Noah built the ark. Anonymous

Every business owner needs an exit plan. Family owners should plan for an orderly exit, so that their personal and financial goals are properly considered, the relevant succession options are identified, the liquidity event is efficiently managed, and the generated wealth is maximised and protected.

But sometimes it isn’t possible to achieve an orderly exit. In fact, it’s more likely that a business succession transaction will be caused by an unplanned event, rather than be the result of a carefully considered planning process.

These unplanned events are often described as the “Six D’s”: death, disablement, debt, dispute, disaster and divorce. According to the Exit Planning Institute, the peak body for exit planning professionals worldwide, 55% of all business exits occur as a result of one of these events.

Any one or more of these events can plunge a business into crisis mode. It’s difficult if not impossible to plan while in the middle of a crisis, so it’s important that a succession plan consider unplanned events first and foremost. The good news is that the likely impact of a crisis event is comparatively predictable, and in a lot of cases there are some tried and tested strategies which can help a business minimise the damage.


For many family businesses, success or failure depends on the owner’s personal skills, experience, passion, and relationships with suppliers, customers and staff. If that owner is suddenly gone, many businesses are unable to survive. A succession plan should involve a “Plan B” for management succession whereby there are individuals who have been provided with the necessary training and access to key business knowledge so that the business can keep running. This applies not only to the owners but for all key management positions. Another issue is funding of lump sum payments to the surviving family, or where there are other shareholders, how those shareholders are able to fund the buyout of the deceased’s family. In many cases it’s possible to structure life insurance to achieve these goals.


Statistically, it’s more likely a business will fail due to an ongoing illness or trauma rather than the death of an owner or key person. Disability of a key individual can cause a drain on cash flow and excess down time which can be devastating to the business. A management succession plan is therefore equally relevant, and products such as income protection, business interruption and trauma insurance can greatly assist.


While nobody goes into a business planning to fail, the fact is that an increasing number of businesses are getting into financial difficulty in a wide variety of industries. An exit plan needs to properly address the business risks and provide for the protection of the owners’ personal assets and investments against the possible consequences of business failure. This usually involves appropriate input from an experienced financial advisor, as well as legal advice from a qualified specialist.


 Business partners might start out as friends or colleagues or, in the case of family business, sons, daughters, brothers or sisters, but today’s dream relationship can easily become tomorrow’s nightmare. It’s important that the rights of a partner or shareholder be agreed in advance in case a dispute arises, or one owner wants to exit on terms not immediately agreeable to a partner or co-owner. A partnership or shareholder agreement should set out how a business will be valued in case of dispute, pre-emptive rights over the shares of co-owners, how to deal with retirement, and policies relating to dividends and capital contributions. There should also be a clearly stated dispute resolution process which everyone must buy into from Day One.


Many businesses are unable to survive a disaster such as an IT failure, robbery, employee theft, or natural disaster like a bushfire, flood or cyclone. While appropriate insurances can help deal with property damage, backing up all key computer systems offsite and having appropriate documentation of all critical systems can help a business survive a disaster. A famous example is the New York bond trading company, Cantor Fitzgerald, which tragically lost 658 of its employees in the September 11, 2001 World Trade Centre attack…but due to a well-prepared disaster recovery plan, it was able to resume its operations just two days later.


A recent report from the Australian Institute of Family Studies reveals that the average Australian marriage lasts just 12 years. Business owners certainly aren’t exempt from this statistic.  It may not be immediately apparent, but the divorce of an owner can cause serious problems in a business if the former spouse is able to claim on the owner’s shareholding in a divorce settlement. A shareholder agreement can provide for a buy-out at an agreed pricing formula, and for many owners, having a pre-nuptial agreement can also be useful, although most choose not to go there with a spouse.

Robert Powell is a Partner in Grant Thornton Australia Ltd’s Private Advisory division. He holds Certificates in Family Business and Family Wealth Advising from the Family Firm Institute, is a Specialist Accredited Adviser member of Family Business Australia, and a Fellow of Chartered Accounts Australia and New Zealand.