What you love about being a business owner is how you’ve been able to set it up to deliver on your own personal goals. You may also want the business to deliver for the people you hand the business on to – whether that’s your kids, your management team, or a brand-new buyer.
Let’s take a look at how you pass the business on to the next generation, and the key steps to plan for, consider and get in place before you exit the company.
Getting the business ready to hand over
When you pass the business to your successor, you’ll want to do so with the company in the best possible shape. No successor is going to want to take on a failing business that has operational issues and little or no future in the current market.
Here are five steps to action before your planned exit date:
1. Start adding value to the business:
A big part of getting ready is about optimizing the business so it’s a viable and profitable enterprise to pass on. Adding value to the business is key to creating a business you’re proud to hand over to the next generation – but it takes time and plenty of planning.
Invest in new systems, machinery and property, so the business is efficient, productive and able to remain competitive. Do the same with your human talent by hiring in the best people and making sure you have a team that’s ready to take over the reins.
2. Develop a succession plan:
Choose your successor(s) well in advance, whether it’s a family member, someone from your top team or a new, external hire. Put together a detailed succession plan.
Mentor your successor and provide training and development to get them up to speed with your strategy, internal processes and overall brand. Set a timeline for transitioning your leadership and operational responsibilities over in as smooth a way as possible.
3. Formalize your valuation and deal structure:
It’s a good idea to get an independent business valuation early on. This helps you set a fair price for the company and start the wheels in motion for the sale of the business.
Work with a broker or a mergers & acquisitions adviser to define the deal structure, whether it’s a gradual sale, staged payments, or gifting the company to your successor. Being clear about the deal helps keep all parties happy and limits any issues further down the line.
4. Address any legal and tax implications:
You’ll need to engage both legal and financial advisers to help you navigate the more complex areas of the deal, sale and handover.
Areas to consider will include reviewing wills, trusts, shareholder agreements, capital gains tax and inheritance tax. Proper planning at this stage helps both parties – you as the outgoing owner as well as the incoming generation – avoiding any potential disputes.
5. Plan for business readiness and continuity:
The business you hand over must be attractive to a buyer, or a viable business proposition for your incoming successor and their management team.
To keep the business trading smoothly, make sure you’ve documented all your key processes, listed your customers, and have maintained the company’s financial health. Clear up any legal issues or outstanding debts and be ready to hand over a business that has a profitable and competitive future in your chosen industry sector.
Talk to us about your exit strategy and succession plan
Getting ready to exit the business takes a lot of planning. Ideally, a five-year exit strategy is advisable, giving you time to plan, prepare, add value and choose a worthy successor.
Where we come in is to help you get a handle on your financial picture and help identify areas that could use improvement. Let’s chat to discuss your goals and to set them in motion!
