Family-owned and run businesses are present worldwide – from electrical and plumbing specialists to accountancy firms and automotive dealers. They are an essential component of the UK marketplace, and long may they prosper. Unfortunately, many of these businesses face problems related to business continuation, which makes us think about business succession planning.
The truth is that approximately per cent of the UK’s family-run businesses don’t have a proper business succession planning strategy.
Even if you are handing over your business to your kids, knowing how to unlock its maximum value is essential. You have invested so much in building it up for many years – you should benefit as much as possible.
This article talks about business succession planning and shares some essential tips to incorporate into your considerations when nearing retirement.
What Is Business Succession Planning?
Business succession planning refers to determining who will take over your business in the future when you retire or if something unpredictable happens. This process is quite relevant for small, family-owned, and run businesses to ensure the company continues to run smoothly.
Some advantages of business succession planning include:
- Putting the correct individuals in charge
- Being clear on your retirement plans
- Preparing for the unexpected
- Having the confidence that your business will be in safe hands
Tips for Business Succession Planning
Here are some essential tips for business succession planning.
1. Start Planning Early
Devising a succession plan can take up to 12 months, and executing it can take many more. There might be some emotionally challenging problems to face. For example, whether it is best to leave your business in the hands of a long-term employee or a relative.
Ideally, it would help if you devised a succession planning strategy three years before you plan to retire. This way, you will have sufficient time to handle any problems and hand over the business. For instance, if you’re a limited company and wish to share the ownership between multiple children, coming up with a shareholder agreement in advance clarifies the decision and prevents any arguments later in life.
2. Pick Your Business Successor
The next thing to do is choose your business successor. It is common for relatives or children to take over, but you could also pick a senior employee or a business partner. You can also hand over the reins to an external buyer.
Changing ownership can significantly impact how a business functions, mainly if it is set up by a group of individuals with different experiences and skills. This is why picking a fitting successor is so necessary. When deciding whom to choose, here are some questions you need to ask:
- Do they have the relevant training, skills, and required qualifications? This might be more important if you are in a specialised industry.
- Do they have the knowledge and experience needed to run a business?
- Are they genuinely interested in the business and its growth?
- Do they have any existing relationships with long-term clients or key stakeholders?
- Are you going to be a part of the business in any capacity? Is that going to be documented?
3. Have Discussions with Your Family Members
Handing your business to your children might seem the easiest route to succession. However, it is usually not that simple. For example, your children might not have the experience required to run a business by the time you retire, or maybe they have aspirations that don’t involve taking over your business.
Discussing the business succession plan helps you identify who in the family wants to be involved directly and who’s focused elsewhere. It might even help some family members find interest in the business they didn’t know they had.
4. Seek Advice from Professional Financial Advisors
Following the business succession planning tips won’t get you very far if you don’t have professional, competent, and experienced advisors.
Preparing for your business’s future is a complicated task, and you’ll often need financial and legal assistance to reach the best decisions and execute the proper procedures.
It’s not a good idea to settle for the lowest-cost advisors. Instead, you should look for experience in business succession planning who can ask the relevant questions and keep an objective view of the situation.
You will have to consider taxes, company finances, and estate planning issues. Thus, working with an accounting firm with professionals in all these areas can be beneficial as you can get guidance in different aspects from a single source.
Choose individuals you can build a solid relationship to make the entire process smoothly.
5. Review Your Situation
Succession planning should not be only about the future of your business. Consider your position when thinking about the best way to move forward.
Do you have enough retirement savings to help you live a comfortable life? Is your life insurance policy going to be valid and relevant after the change in your circumstances?
Making sure that you’re well-prepared for your future can help you work out an effective deal to exit the business at the right time.
Consult Professionals for Business Succession Planning
This business succession planning article covers some of the essential points you should consider when planning to retire, but it’s not exhaustive.
Every business is different. This means each will have its challenges to overcome before the owner can say goodbye.
At ISA Consortium, we have dedicated advisors who can help you with the legal and financial aspects of handing over your business to someone else. Get in touch with us to get more information on how we can assist you or advice on your business succession planning strategy.
Book your free appointment with ISA Consortium
For more information and professional advice, please get in touch for a free appointment. We will discuss all the needs of you and your business, and head you in the right direction for future business .
All this and more
We offer all the above as part of our full Tax Services and Accounting and can also help you with Capital Gains Tax, Inheritance Tax, Retirement Planning, even filling out your Self-Assessment Tax Returns for you.