When asked, most owner-managers agree that one of their key aims is to ensure the long-term continuation of their business for the benefit of their family, employees, customers and external shareholders. This brings to the fore the whole idea of succession planning. The problem is when owner-managers are so focused on profitability and day-to-day management there is little time to sit and think about the issue.
If you know who will succeed you, it’s important to put in place clear legal and financial procedures to ensure a smooth transition. If, as with many businesses, there is no obvious successor, you may want to look at bringing on a senior employee. Where a potential successor is to be appointed to the board, or given a shareholding in the company, the relationship needs to be carefully documented to protect the owner’s interests. Disputes in such situations are not uncommon but can be avoided by clearly setting out the relationship from the outset.
All too often we see directors and shareholders who are trying to sort out shareholdings and directorships following a death or the exit of a key person. This is at a time when their focus really needs to be on the business itself. You also need to consider the financial implications. How is a successor going to pay for the business? There may also be inheritance tax consequences.
It is all too easy to put succession planning at the bottom of your “to do” list but once procedures are in place, you can get on with growing your business. If you need further assistance with any issues connected with succession planning please get in contact with me.