40% of family owned businesses have no succession plan
More UK businesses are looking to the future than ever before. Yet, a stunning percentage of family owned businesses have no plans in place for their business in the event that they retire or pass on. Only 40 percent of them do not have a succession plan in place. Another survey by The Boston Consulting Group also showed that family business leaders ranked succession as the second-most-important subject on their minds. It also showed that little or no succession family can impact the revenue, margins and leadership of the business. So what can family business owners do to protect their business and legacy? They can start by accessing the right support, setting a good governance structure, and reviewing their business plan.
Reach out for training and support you need
In past surveys, a recurring reason behind the lack of succession planning for business owners was that many of them felt that they needed support with the planning process. In a Deloitte survey, 82 percent of respondents found advisors invaluable in their succession planning process. Hiring professional advisors throughout the different parts of the process can help you check all the boxes in the process. When it is time to establish the value of your business during the estate planning process, the services of an accountant, and estate planning lawyer can help you establish the value of your business, set out the distribution of your assets, and nominate your family members to keep assets out of probate court.
Create a revised business plan
A business plan essentially sets out where the business wants to go; its intended future. Because of this, it is wise to revise your business plan at set intervals and when major decisions have been made. This includes the transfer of the business within the family and between generations. A revised business plan can also help new management or owners map out the direction of the business. Speak to your family and take some time to think about what you have achieved so far in your business and what its future may look like.
Ensure smart decisions with a clear governance structure
If you are planning to pass the business to family members, it will mean a change in management and a period of transition. To ensure decisions are made holistically and free from bias, there needs to be a clear governance structure in place. This often looks like the creation of a balanced board of directors, with professionals from all professional capacities including accountants, lawyers, and industry experts. For a smaller, close-knit family business your board of directors can also include relatives and friends.
Last but not least, review and map out any talent gaps that may be created by you leaving the business. Once you have identified the successor in your family, it is also recommended that you consider any skill shortages and leave room for flexibility. For instance, if your designated successor is not well-versed in running a business, technical aspects like accounting or even submitting annual company returns can be overwhelming for them. Ensuring they have the right training and support (in the form of a company accountant or tax advisor) ahead of time makes the process much easier. It also means you can relax knowing your legacy lives on.