Surely, having devoted so much time to creating a successful business you will want the right strategy in place for when you are ready to take a step back?
Ed Hill, Partner at the Walsall office of Midlands accountancy firm Baldwins comments: “When preparing for what will happen to your business after you retire, effective succession planning is the key to a successful management transition. Family businesses make a significant contribution to the local area and the economy as a whole.
“Family owned businesses need to work out if the firm will indeed stay in the family or if it needs to be sold, or passed onto others. If it’s the former then parents should plan an effective exit strategy for handing over the firm, or selling it to their children., children can, through purchasing the firm, effectively fund their parents’ retirement.
“Often parents can’t afford to give their business away and their children can’t afford to buy it. In this situation, we would look at raising finance – possibly from banks or alternative sources. Everyone is aware that lending from any bank is not so easy at the moment, especially for those without a viable business proposition in place. Make sure your business plan is comprehensive and robust before approaching your bank manager. We work regularly with businesses to help them do this.
“You must then establish whether your intended successor possesses all the necessary skills and abilities to fulfil your role. What steps, processes or training do you need to put in place? You will of course also want to consider whether your exit strategy is balanced and fair to all family members. Do you need to look at dividing up shares, roles or responsibilities among siblings?
“Succession runs most smoothly if you can step away from your business slowly to prevent it from collapsing. This can take months, even years, so plan ahead. If you are retiring in the foreseeable future, you should speak to family members and ask questions regarding succession. Don’t simply assume someone wants to take over – having a reluctant owner/manager in place is not the route to a successful future business.
“Before finalising any decisions you will need to be certain about the future of your company management and ownership. Should your intended successor decline the role you will need to consider alternative exit strategies such as a trade sale or you may find that winding up your business is your only option.”
“There are so many family businesses in this area that have the potential to thrive via future generations,” he adds. “SMEs are an essential part of keeping the economy together so it is important for us to ensure family run business owners implement a clear and solid plan that will help them pass on their legacy to their offspring in a way which is beneficial to all parties – and with the minimum stress involved.
“Having helped to advise many local companies over the past two decades, I have formed a deep respect for the small to medium sized local business owner. I have found that sustainable family enterprises in particular are incredibly values-driven and considering the multitude of personal sacrifices founders have made in order to create a successful business, I am keen to ensure they have all the support they need to formulate a plan that will bring them peace of mind and security when they reach retirement.
“With sound objective advice they have the potential to continue their successes through into the next generation which will benefit them, their business and their family for years to come.”