With various routes to uncover when planning for succession, understanding these and how they can meet your objectives and exploring them at the right time in the right way is key to finding the right successor for your business.
In this article we will explain why it is important to have a succession plan in place early on, identify some of the different ways to hand over your firm or clients and look at the how you can find the right successor for your business.
With a responsibility to yourself to exit with confidence, wherever you are on your business journey, succession should be a consideration.
Ideally you build a well-curated succession plan that takes care of you, your shareholders and your stakeholders. When you feel both personally ready and the business is ready, you exit.
Being ‘business ready’ is something you can start to control, even if feeling personally ready is hard to conceptualise right now.
Let’s apply this concept to financial planning.
You present your client with a sea of blue on their cash flow forecast, only this assumes that they can keep working between now and retirement. You have a solution and set up a range of protection policies.
Having a succession plan in place is a way of insuring your business against the ravaging impact a distressed sale would have, both financially and emotionally.
Succession planning is the process of identifying any key members of staff, shareholders and stakeholders who, if they left or were unable to work, would have a material impact on the business.
It is making plans for the continuity of the business thereafter. Continuity of the business could take many forms, with internal and external options available as we will go on to discuss.
The best succession plan provides the current owners with the confidence to be able to step away having extracted the right value from their business, and knowing their cherished clients and staff are not just going to survive, but thrive.
Whether you sell internally to your management team or an employee ownership trust, or you sell externally, the sale is just one part of your exit plan, with the true success of the event being happy clients and staff years later.
Upholding your legacy is important, and as the proceeds of sale are likely to be paid over a number of years, retaining staff and clients are paramount to a successful succession.
You maximise your financial position, and you pass the ‘Tesco test’, meaning you do not have to dart down another aisle when you see an old client or colleague.
Different options
One of the first things to consider is ‘will my succession come from within, or am I going to need to look externally?'. The more time you have at your disposal, the more options come into play.
Let’s start by looking at the two main ‘internal’ exit and succession options available; a management buyout and an employee ownership trust.
