As we approach the new financial year, many business owners will want to prioritise the issue of succession.
Business succession is a critical process for the business owner as they attempt to transition to their next life stage. This can often involve part or full retirement.
Succession in a business can take various forms, including,
- Family succession
- Management buyout
- Full or part sale of the business
- Appointment of a management team, with retention of ownership
- Downsizing the business, with some parts sold and others retained
Often when the issue of succession is raised with the business owner, a common response is they want a full sale for a high value that may not be consistent with the appraisal price. This response can be prompted by the years of work involved in driving the business to the current position
Business owners can also be surprised by the returns obtained in other asset classes (property, listed equities, fixed interest) which can be well below the returns obtained in highly profitable businesses.
Once an owner understands the potential future returns lost after a business sale, there can be an increased desire to retain ownership of some, or all, of their business equity.
If an owner wants to retain some ownership in their business post retirement, the following initial questions will need to be considered,
- Will my business be able to operate at desired growth and profit levels without my presence?
- Does my business have good systems and processes to enable a team to manage it?
- Do I have a successor for my operational role?
- Is it appropriate to offer team members equity positions in the business to enhance ongoing commitment?
- Does my business have the right structure to allow for new equity participants? Are changes required?
- Do I have a clear view of the preferred balance between my personal and business life?
A good first step is to complete our free business succession diagnostic linked below.
https://www.mindshop.com/main.nsf/diagnosticbus.xsp?id=1n2lynamexnnk
At Munro Noon Business Advisers we support clients with every step of the succession planning process. Please contact us today for your complimentary initial appointment.