Often thought of as a purely HR function, the processes involved in succession planning are key to the long-term success of any business, and as such they must be considered as part of your financial plans.
The identification and development of potential should be at the forefront of any business owners mind, after all it’s what you’ve worked for, a lasting legacy that will not only be a source of pride but if managed properly, a potential source of continued income for you.
So, what do you need to consider as part of your plan?
The first step in any plan is to identify which roles are key to business development and there are two ways of looking at this. First, as a ‘defensive’ strategy, which positions could leave you exposed in an emergency, perhaps a technical role or something highly specialised?
Then, there is the more positive consideration, think about who in your organisation might be able to step up, or perhaps you need a new recruit, somebody that could be trained in a number of disciplines.
The old adage of the spare wheel in the car boot applies here…it might be good enough to get you to the next garage, but you can’t rely on it long-term.
But, we are drifting into HR territory here, let’s get to the numbers.
When accountants talk of succession planning, we are really discussing a planned exit from your company, making sure that the business finances are in good shape and offering advice on maximising the returns that you have worked so hard for…
Selling the business
Please, do not underestimate the time it takes to sell a business, unless you are very lucky it can often take months, if not years of ‘getting ducks in a row’ before you are ready to sell. Failure to consider the basics could cost you dearly, and you need an accountant to separate the emotional side of your decision, from the business side.
Well, of course you will have strong feelings, you may have worked for years, decades even to build your business, selling it is bound to be a wrench for you. That’s why we concentrate on the numbers, the facts and figures that will get you the best possible outcome by using a clear, concise and practical set of precise guidelines.
And, once your business is ready to be sold, we can even help you to identify, approach and impress potential buyers for your business.
Whatever the size of your business, you need to have a clear plan in place and be ready to move, seizing on opportunity at the most favourable time for you.
Succession Planning – Part 2, Handing Over Your Business
History is littered with examples of poorly executed successions, William Shakespeare alone made a fine living from stories of ill-conceived inheritances and badly planned retirement announcements.
Whether your plan is to leave the business in the capable hands of a family member or natural successor, the best strategy is to be clear, concise and absolutely certain of your motivation and outcomes.
The sands of time, sadly flow in only one direction and making your plans early does not make you a miserable person, it makes you a sensible one.
Running your business, perhaps it’s a family concern or one you have built over many years, is not just about the money, often it’s been built with the idea of legacy in mind. Unless you are to see this hard work go to waste, it’s vital that you make business decisions, divorced from the emotion you will inevitably feel.
Some of these decisions will be difficult.
Succession planning must be based on appointing the best person, or small group of people that are best for the job. Solid accountancy and empirical evidence can be your saviour in this respect, you identify the soft skills and let us provide the numbers.
Timing is all important, is it to be a clean break or a carefully transitioned handover, will outside expertise be required and do you actually know what your potential successors want?
Do not assume that your natural successors actually want the job.
As with every other component of the handover, the matter of tax must be considered carefully, it might be tax efficient to gift a small proportion of the business to a successor or successors?
You might want to retain some shares, to ‘keep an eye on things’, and again there are tax implications to consider.
And remember, whatever you plan today is not guaranteed to work when you sell. Business reliefs are pretty generous at the moment and we are expecting some sweeping changes to taxes in the coming years. It always pays to check your tax position!
Plan early, plan well and review often.
…and finally, a word from William Shakespeare, he also knew a thing or two about business it seems?
“There is a tide in the affairs of men which, taken at the flood, leads on to fortune; omitted, all the voyage of their life is bound in shallows and in miseries” — Julius Caesar