Succession planning should always be on every business owner’s mind. There is a time in every business owner’s journey when they begin to consider what will happen to their business in the future, and more specifically, when it is time for them to exit the business.
Preparing for succession planning in advance is always better to ensure a seamless business exit. This will give you time to consider all available opportunities properly and understand what will work best for your business.
There is a long list of viable exit routes that you could take; however, in this blog, we will highlight several that could be your perfect ticket to a smooth succession planning journey.
Trade Sale
A trade sale, also known as a disposal, is multi-faceted and could include the whole or only part of the company. Potential acquirers could be one of the following:
- A parallel company
- An international buyer
- A customer or a supplier
- A business outside of your sector
- A private equity investor or venture capitalist
- Your staff – if this is a possible route, there are further options:
- Management Buyout (MBO) or a Vendor-Initiated Management Buyout (VIMBO)
- Employee Ownership Trust (EOT)
Succession Planning: Creating a Legacy Business:
If you are in no great hurry to sell your business, a potential option is to hold off on a trade sale to build a legacy business for the next generation. For this to be a serious exit option, you must evaluate if there is a competent, loyal and willing next generation. You must ensure that they have the right skills to take over the business and review your role in the company. As a business owner who has worked so hard to make your business a success, can you envisage yourself releasing control of the business? This is a much-underestimated area of succession planning.
Understanding Deal Structure
Depending on which route you take, funding may be required if you wish to pass the business over to your existing team. Enlisting the support of professional advisors will help you identify sources and outline how this would work for both parties.
You should understand what you need to extract from the business, and if you have identified how to manage this in the most tax-effective way. Ask yourself what you hope to achieve and what your deal breakers are. For every client who comes to fds for assistance, we work in their best interest and negotiate the best possible deal. We keep the project on track and get it over the finishing line, so our clients can remain focused on the day job.
Next Steps for a Successful Business Exit
Succession planning for small business owners requires great consideration. If you would like to learn more about succession planning, fds can help you understand the options available in greater detail.
We can help you delve into the pros and cons of each business exit option, unique to your specific situation, and aid you in navigating the process. A Feasibility Study exercise can aid you in gaining understanding of the possible outcomes of different succession planning scenarios. Get in touch if you would like further information or if you have any questions.