This month at ilumin, we are saying farewell to Sue McPherson, a Director of ilumin who is entering retirement within the next month. With that in mind, we thought it was time to focus on succession planning for business owners, a very important strategy that is often left to the last minute.
Do you currently own a business? You’ve built your company up from nothing, put years of blood, sweat and tears into its success, and retirement may just be around the corner. What next? If you’re one of the lucky people who have an exit strategy, well done. 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 to buy you out. Either way, you need a plan.
This blog goes through the key steps to succession planning success:
Develop a plan
Ask:
- 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:
- Complete an analysis of financial and non-financial matters.
- Conduct thorough due diligence of business risks.
- Remove obstacles that might hinder succession planning.
- Look at ways to enhance your company’s value, if you’re prepping 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 a 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 is far from straightforward. With so many businesses on the market, yours needs to stand out. Good ones will fetch a good price. Bad ones won’t.
- 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 is a journey
Developing, improving and grooming your business is just the start. Good advisers, including accountants, are invaluable in helping you on your journey. Get in touch with the ilumin team to see how we can help shape your succession plan. Meanwhile, we will get on with celebrating Sue’s time here at ilumin and ensuring we send her off in style, keep an eye out for our next blog post where Sue reflects on the past 35 years as a director for ilumin.