The key to successful Succession Planning

You created your business from the ground up, poured blood, sweat and tears into it, nurtured it and now retirement is looming – what happens next? If you already have an exit strategy, well done! If you're unsure, then it’s time to think about succession planning. This could be handing the reins to a new generation, having someone in the wings ready to buy you out, or selling your business. Regardless of which option you pick, you need a plan.

Developing a plan

Before you prepare your plan, you need to ask yourself two important questions:

1.     What needs to be done to prepare your business for succession?

2.    Do you have a timetable for handing over the business?

There are certain things you need to consider and do when developing your plan. These include:

• a complete analysis of all your business’ financial and non-financial matters;
• a thorough due diligence of your business risks;
• looking for and removing any obstacles that might hinder succession planning; and
• seeking ways to enhance your company’s value, if you're preparing for a sale.

Handing over to family member

If your plan involves handing your business over to a family member, you'll still need a careful plan to navigate the often-complex issues around this.

A family succession plan recognises and accommodates the various needs, goals, and objectives of each family member. It should avoid creating ill-feeling, and take everyone into account – those who are taking over the business, those who are not, and yourselves (what will you need from the business for your retirement?). Compromise where necessary to ensure smooth transition.

Gauge what different members of your family want from the succession process. This can help families work out how they feel, what different people want, what the business needs to thrive, how much money and equity is changing hands, and who gets what.

Selling up

You might assume that selling your business is a fairly straightforward process, but often, in reality, it’s far from straightforward. There are many businesses on the market, what makes yours stand out? Only the good ones will fetch a good price, bad ones will just sit on the market.

• Assess the current position of your business - Perform internal due diligence and conduct financial and non-financial analysis.
• Valuing the business with an independent party is a key part of succession planning - It’s common for there to be large gaps between an owner’s expectations and what the market is willing to pay. Do this early.
• Reflect on what you can do to make your business more attractive to potential buyers - There are four key drivers of business value that need addressing: growth, profitability, efficiency and capacity, and risk management.

Succession is a journey

Developing, improving, and grooming your business is just the start. Good advisers, including accountants and lawyers, are invaluable in helping you on your journey.

Get in touch to see how we can help shape your succession plan.