No-one lives forever. Sooner or later, you’ll want to take a step back from the business you lovingly built up over many years. In an ideal world, you would have family there waiting to jump in and take the reins, but that isn’t always the case.
Succession planning is something all business owners should do, whether you run a small manufacturing business or you’re a financial advisor with hundreds of loyal customers. Smart succession planning ensures the business lives on and your clients continue to be served to a high standard after you take a much-deserved break. Make sure you work together with a professional firm like these accountants London to plan your budget ahead.
US research in 2016 found that 43% of small family-owned businesses don’t have any kind of succession plan in place. The situation in the UK is likely to be very similar, which is a concern.
Why Create a Succession Plan?
The right succession plan means you can walk away, safe in the knowledge that your money is safe, and clients are happy. No succession plan means you could end up losing your money and your reputation. That’s hardly a great legacy at the end of a long career, and if you don’t handle the financial side of things correctly, you might not have the retirement you dreamed of.
Making Plans Well Ahead of Time
Don’t leave succession planning until the day you’re you’ve had enough. Start investigating your options long before you need to retire because of illness. It will take time to figure out what your best options are. It will also take time to train other people to step into your shoes.
Handing the Reins Over to Family Members
In a family-owned business, it is common to hand over control to junior family members, such as a son or daughter, upon retirement. As long as the younger generation is happy to take on the business, this is perhaps the easiest way to transition into retirement. However, make sure the person is willing to take over – don’t assume they want the responsibility if they haven’t shown any inclination thus far.
Small businesses often hire a director designate, someone who can take over when a director retires. Because it can take a while for such a person to be ready for the additional responsibility, it’s wise to plan for a long handover – long enough to change your plans if the person you hire turns out to be unsuitable in some way.
Selling the Business
If your plan is to sell the business, start looking for a suitable candidate well in advance. There are companies out there that specialise in connecting buyers with sellers. For example, if you are an independent financial advisor and you are thinking of selling your consultancy, speak to IFA acquisition specialists, who can advise you on your options and guide you through the process of selling your business.
Finally, always speak to an experienced tax accountant when stepping back from a small business. It can be a complex process extracting your cash and it’s important to minimise your tax liabilities. Expert advice will cost money, but it could potentially save you a lot of money in the long-term!