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Top tips for succession planning

Making the time to consider longer term succession planning can be challenging for clients. The daily pressures of managing their business whilst balancing a home life mean it is often overlooked. Here, Cowgills recommends its top tips for succession planning, including what to consider when deliberating an exit from your business either through a sale to a third party or to the existing management team.


Tips for succession planning: 1. Be clear about what you are trying to achieve

It is crucial for a business owner to know what success looks like for them. Regularly assessing your financial requirements enables you to understand how to position your business and maximise value 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.


Tips for succession planning: 2. Have the right people and culture

Consistent investment in the right people maximises your options. Potential buyers place a higher value on companies with clear values and a strong culture. If you would prefer to sell to the management team, they can be pre-prepared to take the reins ensuring the transition period is seamless.
Having a clear understanding across your company of what your business is trying to achieve, and what it stands for, not only changes the culture and buy-in of your team, but the long-term business results can be startling.


Tips for succession planning: 3. Know your market

It is important to understand who might be interesting in buying your business and where they place the most value. By knowing this, you can ensure your business is well positioned to attract the most interest and ultimately best value for the business. Appointing an advisor who understands your market and knows how to manage a competitive process will often result in the highest value for shareholders.


Tips for succession planning: 4. Timing is key

Ensuring your business is primed for a transaction isn’t easy but there are many things that can be done in the months leading up to approaching the market. It’s often worth having preliminary discussions with an experienced advisor to understand where potential acquirers will place the most value, and where to focus your attention to minimise any disruptions in the process.
Having full visibility of your financial performance is one such area. Getting the best price often requires strong historical performance and demonstrating a clear growth strategy. Investment in your financial and operational systems to increase efficiency and profitability often drives a much better price, but in many cases are the areas that businesses neglect in view of seeking higher turnover.


Tips for succession planning: 5. Choosing the right partner

Sometimes, the decision to sell the business is not purely a financial decision and finding the right “home” for the business is more important. Looking after the employees or maintaining the company’s name is high on the agenda of many business owners.
Whilst the financial motivations are strong, selling a business is a highly emotional transaction.

Business owners may choose to partner with a buyer who may not offer the highest value but represent a more aligned cultural fit and will provide security for employees, the customers and the suppliers. For these reasons, many business owners prefer to sell to the management team knowing they will continue to value the wider stakeholders in the business.

There is no simple answer to succession or exit planning. The key is to be flexible and adapt to your environment. Working with an advisor early on to prepare your business and position it correctly to achieve maximum value is crucial in an ever-changing and dynamic environment.

With this in mind, Cowgills is able to offer Shareholder Review Workshops which allow you to fully understand the underlying objectives of the shareholders and help provide valuable succession planning. Find out more about this service here https://www.cowgills.co.uk/services/corporate-finance/strategic-support/


If you need support for your succession planning or are interested in Cowgills’ Shareholder Review Workshops, get in touch with the expert team today for advice and next steps.

tips for succession planning

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

Corporate Finance
Posted by Cowgills
14th September, 2021
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