Succession Planning for your Business
Posted: Saturday May 30 2015
By: Abbie Coleman
It’s an undisputed fact: a lack of succession planning is a threat to the future of a business - your business.
Succession Planning for your Business is vital to Succeed
By Tasoula Addison, Wills and Inheritance Solicitor
It’s an undisputed fact: a lack of succession planning is a threat to the future of a business – your business. Yet, the vast majority of business owners and shareholders – 96% no less – have not drawn up the necessary documents for the continuation of their company. Just four in 100 family owned business have made that all important plan for the survival of their business, according to Families in Business.
Throughout the recession and less prosperous years that we have witnessed of late, succession planning was regarded as not immediately necessary and therefore wasn’t at the top of the decision-makers priority list as most were focussed on immediate survival. However, with better financial conditions and the financial future looking secure, the topic of succession planning is back on the table and is wholly achievable in 2016.
As the old proverb goes: fail to prepare, prepare to fail.
Problem with Succession Planning – communication
Research has shown that just talking about what will happen when the owners are no longer around is one of the biggest problems. There’s a whole host of evidence that shows raising the issue of succession, the first step in the planning process, is a hurdle many businesses never get over. Let’s have a look at a few facts:
- 36% of successors think that the owner doesn’t actually want to talk about them taking over the business,
- 55% say they stay silent rather than upset anyone,
- 46% have not made a plan because raising the issue is too difficult,
- 27% of successors think talking about the business future will create a family conflict.
The Benefits of a Succession Plan
A business plan for the future makes sure that your business is placed in safe hands upon your retirement, or if something unexpected of worse happens to you that makes you unable to continue in your owner role. Starting the process early means that all stakeholders can be involved, the business is stable and those in decision making roles have a clear vision and direction for the company making for a much smoother and less problematic transition when the time comes.
Putting a structured, legal plan into place can only help the success and prosperity of the business, which really is a no-brainer! Furthermore, early succession planning can help you make considerable tax savings. With more time, you will have more options for tax planning and your business can be structured in a more tax-efficient manner with the help of professionals.
It’s not as simple as scribbling a few notes down on a piece of paper; your business is worth more than this and deserves to be treated accordingly. Solicitors and accountants can be invaluable to help focus discussions and ensure any plans being made are viable from a legal or financial point of view. This makes sure that time isn’t wasted on impractical plans or those that have unintended tax consequences. Having a valid will is also vitally important for all family members in the business, so that the ownership of the business gets passed on to the correct heirs.