After many years building up a business, directors often worry about how to bow out successfully while ensuring that the firm continues to thrive.
The key to ensuring a smooth succession is to start planning as early as possible ahead of your target retirement date. The first step is to hold meetings with those who will run the business when you leave so you can agree an exit strategy.
If you own a large share of the business, the remaining partners or directors may need to raise money to buy you out. Or if the firm is very successful, some of its profits could be used to raise part of the necessary finance. This approach would need Inland Revenue clearance but is worth exploring.
It may be that you agree to sell your shares back over several years so the firm’s finances aren’t put under too much pressure all at once. In that case, you may need to change your will so the arrangement can continue should you die before the sales are completed. There could be tax implications whichever system you choose for withdrawing capital from the firm so professional advice should be sought.
If you own the business premises, you will need to decide whether to sell or lease them back to the firm.
It’s also important that those who remain in the business consider how they’ll get by without you. It may be that your expertise can be passed on to the remaining directors, or they may have to replace you. In that case, a successor should be chosen before you leave.
If you have built up a close relationship with key customers then you should arrange for them to meet the other directors so trust can be developed and continuity assured.
Some entrepreneurs find it difficult emotionally to leave a business they have built up from scratch. If you feel that way then you might consider staying on as a part time consultant. This would provide stability for the firm and reassurance for its customers.
Throughout the succession planning it’s important to get advice from your accountant, lawyer and possibly your bank manager. They will have helpful suggestions and can ensure that the agreement is fair to everyone.
Please contact us in our Warminster office on 01985 214444, or Westbury on 01373 865577, or email email@example.com if you would like more information about the issues raised in this article or any aspect of succession planning.