Five Steps Towards Succession Planning For Business Owners
1.
Preparing to plan - set your financial and aspirational goals for your future and your business
When planning for yourself, your family, and your business, it helps to have a clear idea of what you want to achieve so you can make decisions based on your objectives. You can start by answering these questions:
What are your personal goals for you, your family, and your business?
Setting a timeline of what you hope to achieve a few years before you exit a business can fill you with the confidence that all bases are covered. You might be thinking about selling your business, or what you want to do with your retirement. You’ll also need to consider passing on your wealth, whether that’s to family or a cause close to your heart. In any case, our experts can advise on the routes you can take to reach your destination.
Reviewing all your assets and considering how these can be work for you ensures that you can realistically achieve your goals.
Have you confirmed who’ll take over the business should the unexpected happen or when you choose to retire? Have you resolved any potential family issues that may arise?
It’s important to understand what will happen to your business when you step back, or if you were no longer able to manage the business yourself. Will you want to retain some control over the business, or exit entirely? Will your adult children take over the business, or do they have other ideas?
Planning early and getting your business ready for such a significant event is key. Knowing that your business is being guided in the right direction to achieve your goals is at the top of your priorities.
Are you clear what you need and desire for the future financially?
Do you know how much you already have in your retirement fund and what you’re likely to have by the time you retire? What other funds do you have outside your retirement savings? If you’re exiting your business, do you know what it may be worth? Will you continue to benefit financially through ownership structures?
Altogether, is it enough to maintain your desired lifestyle in retirement?
Reviewing all your assets and considering how they work for you ensures that you can realistically achieve your goals.
2.
Put a plan in place to protect your wealth
What legal protection do you have covering your wealth – particularly as it passes down to your adult children and grandchildren?
Wills and Lasting Powers of Attorney (LPA) are often overlooked by business owners as important factors to protecting wealth. Separate LPAs can be created to control health and welfare decisions, or property and financial affairs, meaning that you have more power over who’s in control, should anything happen to you.
This also extends to the legal protections in place for your business. It’s important that the governance documents of the business reflect your wishes and operate effectively. For example, if there are joint shareholders, having a shareholder’s agreement is key to avoid disputes, now and in the future.
As with all well-thought-out plans, it’s vital to look at the bigger picture to ensure that your personal and business goals are aligned and kept up to date. Overall, this will help to support your business flexibly and can maximise your legacy. You should also consider insurance to cover any consideration for share transfers. This will help to support your own family, your shareholders, and protect the value of the business.
3.
Discuss your plans with family and loved ones
Talking is key.
Succession can introduce deeply emotional issues for you and the family. Keeping your family updated on your plans for the future can help to manage expectations, particularly if relatives own different stakes in the business, or non-family members become involved. Clear communication, aligned with a formal shareholders agreement, can help them understand any decisions that may impact them in future, avoiding disputes in the years to come. It can also open other opportunities not considered before. It may be that your children don’t wish to take over the family business from you, but you still want them to receive its financial benefits. Or if they want to run the business after you’ve retired, they may have different ideas as to where the business is headed. Having an advisor or a third party can help resolve difficult conversations.
4.
Review regularly to ensure you are on track for the lifestyle you want
Your goals may change over the years, or you may be met with an unexpected event which alters your plans. On a personal level, a relationship breakdown of your marriage, or even your children’s’ marriages, can mean your plans need to be altered. The last few years have also proved that businesses need to remain vigilant. We can help with all stages of yours and your business’ lifecycle to make sure your plan continues to work for you.
5.
Get expert advice with a trusted advisor
Once you’ve got a good idea of your business’ direction, goals and financial situation, you’re ready to talk with one of our experts.
We’ll take the time to get to know you and what drives your need for legal advice. You can then benefit from our expertise of supporting business owners and explaining the options that are available to support you.
Ready to get started?
Talk to an expert today to find out how we can help you and your business.