The survey questioned 1,800 UK businesses. For those firms that did have plans, 24 per cent expect the owners’ departure to lead to a complete trade sale and five per cent expect a complete end to the business. Generally, the highest proportion of firms expects a succession by family members.
Leigh Taylor, regional director for Lloyds TSB Commercial Banking in the Midlands and North, stated: “For an established and successful business, the retirement of the founder or directors can mark the beginning of a new chapter in its development as new leadership takes over, and should not necessarily signal an automatic end of the road for the company.”
There are a number of steps that a firm may want to take in order to ensure the on-going success of the company and its employees.
An initial measure is registering as a limited company, which will legally distinguish the company and the owner as separate entities. This will also allow the ownership to be easily changed; whether it is to family members, an employee buy-out or a complete trade sale.
If the owner wishes the company to continue through a successor, then the selection should be made in advance. Keep a clear and open mind, as decisions should be made rationally; a family member may not necessarily be the best choice for ensuring long-term business success, similarly, they may not want the responsibility that the role can bring.
If the successor is an individual then it’s important to make certain they are fully prepared for the role; consider improving their leadership through managerial courses or a degree. On-the-job mentoring and thorough training is also essential to make the succession as smooth as possible.
Alternatively, if the decision is made that a sale is the best option for the business then ensure careful planning with the assistance of professional advisors, including a lawyer and an accountant. Detailed audited financials are important for a smooth sale at the best price. A full valuation is also a necessary yet significant step, so consider working with appraisal and valuation experts to determine the full company value and ways it could be improved before the time comes to depart.
Any thorough business plan should include long-term factors, including business expansion possibilities and opportunities. It is equally important to include the exit plans of directors and owners, which can be just as critical. As Mr Taylor states: “As a company grows, so too does its workforce, whose livelihoods can be dependent upon the company’s continuing success.”