What Is Your Succession Plan?

Robert Dowling, Partner and Head of Corporate Finance at MHA Carpenter Box, offers some tips on preparing for the sale or transfer of your business.

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.

Whatever the size of your business, a succession plan is essential to realising the best value from the hard work you’ve put in building your business. We have prepared a few tips to help you plan for a low-stress, high-value transition for when it’s time to sell or transfer ownership of your business.

Define your objectives

The starting point for any succession is to plan early. Think about 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 accountant, business advisers, lawyers and of course your wealth management advisers – pension and income considerations will be a key part of any deliberations. 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

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. Keep key stakeholders (business partners, employees, and family members) aware of your plans as early as you can.

Set a reasonable timeline for the creation of your succession plan and try your best stick to it. Review the plan annually along with your business plan, and have contingency plans in place in case any sudden life changes require an unexpected exit, either of you or indeed your successor!

Final tips

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 will want to consider the value of the company. And moreover, what you can do to enhance that before the time to sell comes. Much can be done on this area, but it does take time to bed any changes in – it’s certainly not a last minute consideration.

Finally, you will need to consider how much or how little involvement you want in the company in future and this can be negotiated during the sale process.

Our Corporate Finance team provides a full range of advisory services for SME clients. For more information on succession planning for your business, please contact Robert Dowling on 01903 234094.