If you’re a business owner, you’ve probably thought about who will take over once you retire. It may be family, it may be colleagues, or someone you’ve recruited already with that goal in kind.
A business succession plan helps you set out the transition from your full-time involvement in your business. It should cover key aspects such as:
- Ownership succession and shareholders
- Management succession and changes in roles
- Recruitment and development of new talent
- Knowledge transfer and training
Continuity is key
At its core, all business succession planning has one key aim: continuity. Employees, stakeholders, customers, suppliers all want to know that the business they are invested in is going to be in good hands and continue to thrive and grow.
You also need to make your plans now whether you’re planning to retire or nor. As the Federation of Small Businesses say, “Preparing early can give you peace of mind.” Business succession planning can help small business owners to:
-"Get ready for the unexpected
- Be clear on your retirement plans
- Make the process easier
- Have confidence your business will be in the right hands
- Future growth of your company.”
Business owners’ exit strategy
Often, business succession plans include an exit strategy that assumes that handover going to happen on a set date, after which you head off into a well-earned retirement. Or there is a phased handover with you reducing your personal involvement on a daily basis, but retaining a financial stake and/or a seat on the board.
You may have your exit strategy and handover timescales nailed down, but life has a habit of getting in the way. Your business succession planning needs to cover the unexpected, such as:
- You becoming seriously ill and/or losing your capacity to run your business
- Your business partner falling seriously ill, losing capacity, or dying
- A major shareholder/stakeholder dying without having made a Will and/or leaving their share to unknown others
Illness and incapacity
For many, one of the most shocking aspects of the early days of the COVID 19 pandemic were people being put into induced comas for up to 90 days. Suddenly, people who were fit and well just a couple of weeks ago were rendered incapable for weeks and months.
This is precisely why any business owner should have a business LPA (Lasting Power of Attorney) in place. This enables your appointed attorneys to carry on running your business for you, including:
- Having access to bank accounts
- Paying bill, wages and suppliers
- Ensuring the validity of current and future contracts
- Financial security/reassurance for investors and shareholders
It’s also important that your business partner/s have their own LPA in place, for the same reasons.
Death of a partner or yourself
As a partner in any business, you need to make provision in your Will for what will happen to your share of the business should you die. It’s also vital that your business partner/s know and (hopefully) agree with what you want to do.
For example, if you leave your share in your Will to someone in your family, they may not want to take on the potential burden of your business. If so, your business partners may not have the finances to buy your share from the family. Insufficient funds might force the business to be sold. (For more scenario examples here: )
Business relationship succession
This is an interesting approach towards recruitment for succession from a wealth management company in the US.
“Relationship succession is a crucial and often overlooked piece of the (business succession) puzzle. Organizations often ride on the backs of strong relationship managers. You need to avoid and plan for problems that could be crippling if one of those people should leave, get sick, die or quit. It’s a process, not an event. A conscious effort must be made to bring new faces into key relationships to shore up the problems that could exist if not addressed.”
These business relationships will also exist amongst those in your boardroom, at shareholder meetings, between senior managers, sales teams, your suppliers, between directors, partners and in your family too.
At Panthera Estate Planning, we have strategic relationships with accountants and other legal professions to provide a complete resource network for our mutual clients. We are happy to work with your accountant so that all the planning you do can continue whatever happens.
Succession planning with Panthera Estate Planning
To discuss your succession planning and your will, contact us here at Panthera Estate Planning. You can book an appointment either as an online call or in person at our offices near Waterlooville, Hampshire.