Business Succession Planning: Fail to Prepare, Prepare to Fail

The demands of running an owner-managed or family business can be great and many business owners spend little or no time planning for the succession of the company.  But considering the future and making a succession plan can be critical for the growth of the business, handover of ownership, the reduction of taxes and mapping out your retirement/exit plans. An owner-manager usually envisages retirement and selling the business someday but has not considered how that will come to fruition.  Owners need to understand what the current position of the business is in terms of how it operates, who the key employees are, who the key customers are, where the value lies and what the current needs are. They can then prepare for new structures or new leadership.  Owners also need to consider the other shareholders of the business and what provisions are in place in terms of shareholders’ agreements, cross options and bespoke Articles and their family estate planning. Set out below are some questions you might want to ask yourself to consider your business succession planning: 1.    What are your personal goals in terms of exit or retirement? 2.    What is the timescale are you working to (ie. retire in 3 years) and what value are you seeking?  Have you had the business valued? 3.    Is this valuation realistic in terms of the company’s worth and your retirement plans? 4.    What is the vision for the ongoing ownership and management of the company? 5.    Do you have an identified successor?  Will you be looking for a third party sale, a management buy-out or transfer to family? 6.    Have you taken tax advice as to the best option for you personally as a seller and for the company (as applicable)? 7.    Do you have a contingency plan if a business owner dies or becomes unable to continue working due to ill health or other reasons? 8.    Have you considered other options to help the company achieve its succession goals or to release cash to shareholders, such as restructuring, company buy-back of shares, reduction of share capital or employee ownership trusts? For further information on Business Succession Planning, please email our Corporate and Commercial Team on corporate@mlplaw.co.uk or alternatively call 0161 926 9969 and also refer to our previous blogs Succession Planning Part 1 – Some Exit Options and Succession Planning Part 2 – Issues to Consider