Succession Planning – Your Questions Answered
Less than half of private family businesses are thought to have a succession plan in place, yet preparing for the owner’s eventual exit demands careful consideration.
Furthermore, early planning and informed decisions could help to secure the future success of the company – and its owner.
Here is a selection of the questions that we are commonly asked on this topic.
Q) I’m not ready to exit the business, so why do I need a succession plan?
A) Early planning is paramount when preparing for your eventual withdrawal from a business. Sufficient forethought will help to ensure that a current owner has enough time to identify and groom a competent successor, and that the transitional period is as smooth as possible – last minute or rushed decisions could jeopardise the future of the business. Knowing exactly how, when and to whom ownership will be transferred could also help to avoid or reduce any tax on the change of ownership.
Q) Which options are available to me?
A) This really depends on the type of business and your individual circumstances. You may decide that you want to transfer ownership to a family member or bring them into the management team. However, if this is not a suitable option, you might consider coaching a non-family team member who understands the business and has the skills required to take the company forward. Alternatively, you may want to dispose of the business through a sale, management buy-out, management buy-in or voluntary liquidation. To discuss which option may suit you and your business, please contact us.
Q) What should I look for in a potential successor?
A) When selecting a potential successor (if applicable) you will need to remain objective and consider the needs of the business. Does the candidate have the skills, experience, commitment and leadership ability to take the business forward? Once you have made your decision you will also need to consider what form the mentoring and training will take. Taking a step back and allowing your successor to make some important decisions ahead of time will enable you to test their readiness.
Q) What should I do next?
A) Once you have decided on the course of action for your withdrawal from the business you should formalise the plan. This can be a useful way of exposing weaknesses, which can then be addressed. You should also draw up a timetable of necessary actions, as a succession plan may take several years to implement. Remember, your plans for succession need to be communicated effectively to other members of staff as well as customers and suppliers.
For advice tailored to your individual circumstances, please contact Morris Crocker Chartered Accountants