Retirement is a thought many small-business owners avoid. However, to ensure the future of the business, so all the hard work is not lost, succession planning is an area to attend too.
Retirement succession planning is best begun at least two to three years in advance. Of course, it's never too soon to start. Unexpected circumstances, accidents, and emergencies have a habit of cropping up at the most inconvenient time. Have a crisis management/succession plan to cater for resignation, illness, accident, disability or death (affecting you or your key staff) as well as a more orderly planned succession at your retirement. This way no one is left wondering who is responsible for what, and how the business can continue to trade.
Crisis Succession Planning
Staff that are instrumental in the running of your business are referred to as 'key staff'. Without them running the business would be difficult, if not impossible. Not necessarily senior positions holders, key staff will vary across different businesses. Identifying key roles and key people means succession plans for each role can be put in place. Once identified, adequate internal moves can be made to enable key staff to become capable of fulfilling a vacated role. Successors may be already able to do the job (short-term successors) or be seen as having long-term potential.
Organised succession planning
Some of the issues to consider are here but always consult with a qualified accountant, lawyer and/or corporate financier for professional advice on selling or transferring your business.
- Trade sale
- Winding up
- Management buy-out
- Passing the business on to a family member
Choosing a successor
- Enough money to retire on
- Continuity of employment for your staff
- Preserving the value of your business
- How ownership will be transferred
- How to scale down involvement, and over what period of time
- Inheritance tax and/or capital gains tax may apply
- Employees' rights
Who is the best person to run the business?
- Consider on merit and use commercial rather than emotional rationale
- Avoid the temptation to appoint someone because they remind you of yourself
- Don't automatically appoint a family member –Pick the best person for the job
- A trusted employee may be the best person to take control
- Don't discount the value of bringing in an outsider – all organisations will benefit from a fresh outlook and new ideas
- Ensure the workforce is as diverse as your target customer base – this relates to age, gender, experience and ethnicity. Different perspectives will create more opportunities