Succession Planning - are you ready to hand over the reigns?
23 October 2007
As part of their planning every small business owner should be considering succession planning. If they were to retire and leave their business who would carry it on? Those who have considered their options may have already addressed these issues in their shareholders agreement, partnership agreement or even in their will. But for those who haven’t turned their mind to such matters, early consideration is important as the alternatives for succession are wide ranging and may take time to develop and implement.
The business owner may consider looking internally at the existing management, the other employees, family members or fellow owners as successors. Do you want or expect one person to succeed, or a committee? Do they have the potential or the ability to take the business forward? What do you need to do to bring them up to speed and how long will it take? What and when do you tell them? How would they fund a management buy out? Would you as a business owner be prepared to finance them with vendor funding, or would you be prepared to let them use your business’ assets to secure funding? Would a bank be happy to lend to them? Is floating the company an option? There are many questions to be considered.
External alternatives may also be available to allow a business owner to exit. Do you have a competitor or is there a complementary business who may be interested in purchasing your business? Brokers and corporate financiers specialise in matching buyers and sellers, and so if the external route is taken the business owner may be best placed engaging such advisers. Preparing your business for sale can be a very lengthy and time consuming process which is why planning in advance is so important.
Always start succession planning early, invest in time to get it prepared and you should maximise the value of your exit from the business.
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