As a business owner, you can spend so much time building your company that it’s easy to overlook some important factors.
One of those is succession planning – and while it may seem like something to worry about in the distant future, if the unexpected occurs (eg: health issues) you’ll be much better placed to exit if you have planned for it.
You’ve created your company from nothing, put years of blood, sweat and tears into its success, and retirement is just around the corner.
If you’re one of the people who have an exit strategy, congratulations. If you’re unsure, it’s time to think about succession planning.
Succession can mean handing over the reins to a new generation or having someone in the wings ready to buy you out.
Either way, you need a plan.
Here are some questions to consider:
- What needs to be done to prepare your business for succession?
- Do you have a set timetable for handing over the company?
When developing a plan:
1. Complete an analysis of financial and non-financial matters.
2. Conduct thorough due diligence of business risks.
3. Remove obstacles that might hinder succession planning.
4. Look at ways to enhance your company’s value, if you’re preparing for a sale.
Handing over to family?
You might be planning to hand over your business to a family member but this still requires careful planning.
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. 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.
The lowdown on selling up
You might presume that selling your company is a golden ticket to a dream retirement but making that a reality takes forward planning.
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 planning is a journey.
Developing, improving, and preparing your business for succession is just the start. Good advisers, including chartered accountants and legal counsel, are invaluable in helping you on your journey.
Get in touch to see how we can help shape your succession plan.
Pathfinder Solutions can help you shape your succession plan. If you’d like to know more, please do get in touch.
About Pathfinder Solutions
Pathfinder Solutions advisory team members have either owned or managed businesses, or are investors themselves, so we know first-hand the challenges you face in your world.
Sure we’re Accountants, but the best solutions in business come from focusing on more than just the numbers. Our real-world business experience delivers just that.