What is your succession plan?
According to recent research, more than half of UK small businesses are operating without a succession plan. Recent stats from PWC Global show that family owned businesses around the globe aren’t much more prepared: 43% don’t have a succession plan in place, and only 12% survive to the third generation.
No matter whether your company has one employee, a hundred or a thousand, a succession plan is essential to minimise the risk of financial loss.
We’ve prepared a few tips to help prepare for a stress-free transition when it’s time to sell or transfer ownership of your business.
Define your objectives
The starting point for any succession plan is a reflection on your long-term goals, both personally and professionally. Where do you see yourself in five or ten years? What would you like your retirement to look like? Who are the best people to take over if you have to step away from the business suddenly – and how can you best prepare them for the task?
Once you’ve tackled the big picture questions, your next step is to seek planning advice from professionals. This should involve your lawyer, accountant, and business advisers, and include wealth management. At the same time, you’ll be able to start coaching your successor and training your employees for a smooth transition when you do leave.
Tips for successful succession planning
Most entrepreneurs find it daunting to think about everything they’ll need to do before they can leave the company they’ve worked so hard to build. It takes time to create a useful, well thought out succession plan. So start early, and don’t rush the process.
One of the most important elements of succession planning is clear and timely communication. Be sure to keep key stakeholders, business partners, employees, and family members involved in the planning process early and often.
Set a reasonable timeline for the creation of your succession plan and try your best stick to it. Once you have a plan in place, schedule a review on a yearly basis. It’s always wise to have contingency plans in place in case any sudden life changes require an unexpected exit.
Many business owners time an annual review of their business plan along with a review of their succession plan to ensure both are always up to date.
Although it’s impossible to predict how long it might take for a small business to sell, a good guideline to keep in mind is two to five years. In addition to other professionals you’ll want to consult as you draft your succession plan, you may want to consider the services of a business broker.
Ask your business colleagues for a referral to a local broker with experience in your industry. A good broker can really streamline the sales process and maximise the perceived value of your business to buyers.
It can be heart-wrenching for a business owner to walk away from their company, and some entrepreneurs will plan to stay involved in some way for a few months or indefinitely. Many find maintaining an ongoing role in their business can mean a more satisfying, and financially stable, retirement.