Succession planning is crucial not only for the longevity of your business, whether it's a small to medium-sized enterprise (SME) or a farming operation, but also for securing your family's future.
It's a topic that often gets postponed until the approach of retirement. However, the unexpected can happen at any time, leaving your thriving venture vulnerable. What measures are in place to ensure continuity? How detailed is your succession strategy? Determining the right time to transfer assets, knowledge, and skills is essential. It’s important to start succession planning as early as you can so everyone involved knows what will happen and what is expected of them. Don’t be one of the 9 in 10 businesses which don’t have a succession plan in place.
A succession plan is a strategic framework for transitioning ownership, knowledge, and skills to the next generation, encompassing not only family-run farming businesses but SMEs. This comprehensive process often involves deep-seated emotions and critical decisions, such as determining the future leadership of a farm or the potential sale of the business if there is no successor. The plan needs to be inclusive, outline how the transition process will take place, and be reflective of your wishes. It should be fair to everyone, agreed upon and updated if things change.
Informal discussions with family members and key stakeholders of the business, prior to formalising your succession plan can help prepare them for the transition. It's essential to address the needs and wants of all involved parties, ensuring transparency and openness about the future direction. Reflect on the current state of the business and your long-term goals for it. Should you decide against family succession, it's important to communicate this decision clearly to avoid any future misunderstandings.
You should discuss your expectations for the future with your family and what the structure and obligations are for those who will take over. Consider getting a consensus so that the succession plan is inclusive and is about how the business will continue. It's not just the transference of assets but about the people and how to manage the business. You should also consider how viable the business is overall – it needs to give you the lifestyle you want and if it isn’t, you need to consider what your options are.
If one or more of your children want to run the farm or your SME, it's crucial that they communicate this intention clearly, along with what they may need from the business. The sooner this is known, the more you’re able to build the skills and capability in the next generation and train them to take over the business from you. For those not involved in the business, consider offering alternative financial support, like assistance with a home loan or a monetary gift. You may also want to consider what (if any) sacrifice you make with regard to capital and security to help the next generation become established.
If no one wants to take over the business, consider partnering with other young people who are motivated and passionate about your business. Teach and upskill them with a view of passing the business on to them in the future.
For SMEs and farming businesses alike, obtaining specialised advice is crucial, particularly from professionals experienced in succession planning. Including your trusted advisors, such as lawyers and accountants, is beneficial as they can assist in defining a clear vision for your business and developing a strategic framework to realise it. A well-informed advisory team, familiar with the intricacies of your enterprise, can significantly streamline the succession process, ensuring a smooth transition that aligns with your business objectives.
Things to consider are business profitability, business life cycle (good times and lean times). The business may only have assets during the transition. Just looking at the accounts may not be enough but understanding the strategy and vision for the business gives a much better overview. Transition phases may require difficult decisions, where an advisory group's perspective can be invaluable. While the incoming generation may be eager to implement new ideas, the out going generation might find relinquishing control challenging. Here, an advisory group can offer an impartial perspective to enable a smoother transition.
Finding the best time to retire will be different for everyone but consider if it’s time to transition. If your business is anticipating growth, it might be a good time to transition to the next generation. However, your experience and knowledge will always be valuable.
Succession planning can seem difficult, but it is essential for the future of your business. If you haven’t already started, then the time is now, while the choice is still yours.
We can simplify succession planning by guiding you through every step, from pinpointing your current stage to crafting a tailored plan for your business. We can also assist with the formation of an advisory board, ensuring transparency and fairness for you, your family, and other stakeholders throughout the process. Just get in touch, if you would like to know more.
