insights
5 reasons why Buyouts and Employee Ownership Trusts are attractive exit options
Some business owners like the idea of taking control of their exit by exploring a management buyout or Employee Ownership Trust.
Your legacy is important. The business practices and culture that you have developed over the course of your career should continue after you hand over the keys to the next generation. Effective succession planning can reward you financially, protect your business and give its new owner the best chance of success.
Succession planning is an extension of your overall long-term business strategy. It involves identifying and developing talent that will ensure your business will be protected, managed properly, and will continue to thrive long after you retire.
The scope of succession planning is not limited to who will take over the reins of your business, it should consider how your successor is chosen and the role you will have, if any, after you hand over control. The plan may outline, for example, how the future leader will be prepared for succession, the management style and direction of operations you envision, and the structure and responsibilities of the team that will be involved.
If your desire is to stay involved in the business to some extent, you may consider decreasing your workload or daily responsibilities, acting as a “consultant” when major strategic decisions arise, or acting as an ambassador/familiar face that can provide reassurance to your existing clients as the business evolves.
Our team has spent decades partnering with owner-managers, helping with succession planning and management/family succession buyouts.
We know that personal motives are at the heart of business succession – so we’ll listen carefully and find practical ways to satisfy them. Together, we’ll create a succession plan for you that’s realistic, rewarding, and robust. Get in touch today.
Having established the scope and purpose of succession planning, below are 5 key steps to effectively planning your succession.
There are roles within your business that are essential for running your company. You should undertake a risk assessment to identify key roles and individuals whose retention is crucial to the future success of the business. Understanding the functions and the roles play in the business enables a smoother transition. PEMCF can help you identify which roles are critical to be included in the succeeding management team.
Assessing the gap between what individuals in key roles are capable of and what is necessary for the future success of your business is a must. This involves understanding the skill set, qualifications, and personality attributes your team need vs what they currently have. If exit is suitably far on the horizon, some of these skills can be developed, however bringing in additional resources to cover weaknesses may be required where the gap cannot be bridged.
Depending on your assessments from the first two points, internal candidates may show potential to be your successor, or it may be in the business’ best interest to search externally. However, the second-tier management reaction to an external candidate should be considered, and a considered approach may be required. A hybrid option is also possible, bringing in an external candidate to cover weaknesses in the current second tier management team.
A detailed business plan, along with a timeline to bridge the necessary gaps in skills, competencies, and experience is essential. A business owner needs to understand what the potential exit horizon looks like, ensuring the business is equipped to reach its intended handover position. Our team’s expertise in management buy outs can help assess this and can assist in preparing a business plan to bridge the gap.
To ensure successful implementation of your succession plan, it important to monitor the progress of your business, and the key individuals within it, in relation to your development plan. This will support you in your decision and may impact the implementation time frames or decisions on the succession team depending on performance in this period.
The business you have created is the culmination of your values, hard work, and vision. It would be our privilege to help you prepare, and implement, a plan to protect and build-upon your legacy.
If you are starting to think about succession, preparing for the future, or just interested in what we can offer you, feel free to get in contact with our succession planning experts.