Tips on Succession Planning for your business
Succession planning involves transferring the management and control of a business to a new owner/s. This can be a difficult and, often emotional time. But it’s never too early to think about planning ahead.
A strategically thought-out succession plan will set you on the right road from the get-go. Being clear and concise regarding the future should help to ensure a smooth transition for both sides.
The main options for business successions are:
- Transfer of the business to a family member
- Transfer of the business to a non-family member
- Sale or management buy-out
- Bankruptcy / insolvency
5 key steps for Succession Planning
Although each individual business will have personal and bespoke needs, there are common measures which every succession plan should bear in mind.
- Don’t delay – Your succession plan should be put in place at least three years ahead of your retirement date. Creating your plan can take a year or so, and applying it even longer. Allow yourself long enough to iron out any unforeseen issues or challenges that may arise along the way.
- Identify your successor – Is there somebody you work with who knows the business well and is ready to step in and take over the reigns?
- Plan a realistic and achievable timetable – Be clear on your goals and objectives, keeping the lines of communication to your leadership teams open and concise. Ensure that any action points assigned are completed and nothing is left to the last minute.
- Communication – Be sure to keep key stakeholders, business partners, employees, and family members involved in the planning process early and often. It’s key to also remember at this stage that you keep communications open with your clients, contacts and suppliers about the upcoming changes.
- Efficient transition process – As you move toward your retirement or new venture, it’s important to focus on creating a strong financial future for yourself and move away from the day-to-day operations of the business.
Considerations for the ‘New Normal’
The onset of the Coronavirus pandemic has made it virtually impossible to predict or plan for the future. The current economic conditions has meant that businesses are finding themselves having to trade under extremely challenging and unprecedented conditions.
Forward planning and the ability to think in terms of what’s best for any business is key to it’s survival. The COVID-19 crisis over the past year has had a significant impact on the economy and businesses are now emerging into a different looking future.
Throughout 2020 and beyond, COVID-19 has stressed the importance of resilience and agility for a business in order to continue to strive, with companies being forced to close their office doors more or less overnight and keep workers safe and informed.
An example of an effective business model here is the family business. Staying strong and achieving longevity due to their delivery of effective long-term goals.
Family businesses are generally passed on to younger successors, and it’s important to note this will often bring with it a new spin such as acquiring new technology and digitalisation or expanding the business into other areas. For example, the latest Attitudes Survey by Knight Frank revealed that the younger generation want to operate in a more environmentally and socially responsible way.
Encourage younger family members to contribute fresh ideas to the business and involve them in key decision making along with stakeholders so that they can improve and develop their own voice.
Selling the business
With everything in place and your succession plan drafted, it’s a good idea to consider the services of a business broker as well as the advice of other professionals, such as business and financial advisers, along the way. Particularly given the current climate, it would be difficult to predict the timeline for selling a small business, but it could take anywhere between two to five years as a rough guideline.
Our Corporate Finance team are experienced in advising SME business owners on succession planning and preparing their business for sale. If you’d like to explore any of the above in further detail, then please get in touch with our team on 01903 234094.