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Succession planning: top five tips

Motivating clients to think about the ‘what-ifs’ isn’t easy. It’s difficult enough coping with the day-to-day pressures of running a business, and balancing this with life at home, without having a crystal ball.
Planning for succession or exit is an area that is often overlooked until it’s too late. Here, I provide my five top tips of what to consider when deliberating on exiting your business either through sale or succession.

  1. Know what you are trying to achieve

It is crucial for a business owner to know what success looks like. Regularly assessing your financial requirements enables you to understand how your business needs to look to be valuable enough to provide you with the income or capital you need for retirement. It also provides you with a yardstick to measure where you are against your objectives.

  1. People and culture

Consistent investment in the right people gives you so many more options. If you are looking to sell this can only be attractive to a potential suitor. If you would prefer to sell to your management team they can be pre-prepared to take the reins.
If this is coupled with providing a clear understanding, across your company, of what your business is trying to achieve, and what it stands for it not only changes the culture and buy-in of your team, but the business results can be startling.

  1. You may need to buy or sell first

To obtain the best price on exit it maybe advisable to acquire a complementary business or dispose of a division that may not be attractive to an acquirer – it’s often better for you to take away the negatives than to allow for a discount, chances are a buyer will overestimate it.
It is important to understand who might be interesting in buying your business and what they consider valuable or an attractive option. By knowing this, you can ensure your business is at its most saleable.

  1. Timing is everything

Sometimes the market is so hot you can’t avoid being curious about exiting. Ensuring your business is primed for this isn’t easy but there are many things that can be done along the way, it’s often worth having the preliminary discussions/ consideration before you’re ready. Having time on your side is a huge advantage.
Having full visibility of your financial performance is one such area. Getting the best price requires demonstration of your growth prospect and not just historical performance. Investment in your financial and operational systems often drives a much better price, but in many cases are the areas that businesses neglect in view of seeking sales or turnover.

  1. Be careful what you wish for

Some business owners regret selling their businesses. Not because they didn’t get ‘enough’ money but because they felt they had sold to the wrong people. Looking after the employees is high on the agenda of many exiting business owners.
Whilst the financial motivations are strong, selling a business is a highly emotional transaction. I have seen occasions where a company has been sold to a lower bidder purely because they felt there would be a better fit with the employees, the customers and the suppliers. This is why some business owners simply prefer to sell to the management team knowing that they are probably not achieving the maximum price.
There is no simple answer to succession or exit planning. The key is to be flexible and adapt to your environment.
Early planning is crucial as the dynamics change constantly and it is essential to be ready to react.

This article is for general guidance only. It provides an outline, and may not include points which are important to your situation. You should not depend on this blog without taking advice based on the full facts of your case. The information given was correct at the time of publication.


The information was correct at time of publishing but may now be out of date.

Posted by Cowgills
27th February, 2018
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