Small business succession planning – it’s a family affair
The independent, family-run businesses that grace all parts of the UK are undoubtedly an integral part of our culture; they’re reliable and a great source of assistance in local communities.
But, family businesses are not just culturally significant, they’re also key contributors to the UK’s economy. According to PwC’s most recent UK Family Business Survey, 60% of UK family firms said they have generated consistent revenue growth this past year, whilst 94% plan to grow their core business.
This is a figure particularly significant when you consider that in its Small Business Index for Q3 2017, Federation for Small Businesses (FSB) revealed that a record proportion (13%) of business owners currently expect to downsize, sell or shut up shop. This is the highest percentage since it began measuring in 2012.
However, PwC’s report also noted that while confident, family businesses are not without their fair share of challenges: the number one being strategic succession planning. Only 13% of UK family firms felt they had a robust succession plan in place, compared to a global average of 15%.
Unfortunately, anything can happen at any time, so it’s vital that you have a concrete succession plan in place if you’re preparing for the eventual transition in ownership of your business to a family member.
So, whether you’re thinking about handing over your business within the next year, or not for another decade, here are some top tips to consider when it comes to succession planning.
Get started sooner, rather than later
Most small business owners have to juggle a lot of responsibilities, so admittedly succession planning is something that can easily fall to the bottom of a long list of priorities.
Building a comprehensive succession plan can take as long as three years by the time you’ve explored your options and firmed up a decision. In addition to this, they can also take a while to be implemented, so it’s a good idea to get started sooner rather than later.
Invest in your successor
This is one of the biggest pitfalls in succession planning. Business owners can be so preoccupied in the present that they forget to build the skills and engagement of the successive generation. Not only is engaging them in key business discussions important, but investing money into any relevant training can also be worthwhile. After all, the successor has to be a willing one and once engaged they’re more likely to step up to the job when the time comes. Training can increase the experience and capability of the successor, as well as making them feel truly valued.
Be open to change and don’t hold on too tightly
As part of getting your succession plan in place, it’s important that business owners sit down with the person they plan to hand their store over to and exchange ideas for the future of the business. Roles and responsibilities of the predecessor and successor will inevitably change before, during and after the course of the succession plan and understandably, it can be hard to let go of your vision.
Remember that while your experience and consultation is invaluable as the owner, as the successor gains more responsibility it’s important to be open to a little change.
Brief them on the nitty gritty: figures and finance
Figures and finances can sometimes confuse the most experienced of business owners – it takes a long time to learn the ins and outs. A successor should know who they can turn to if finances for the month don’t go to plan or there’s a cashflow mishap.
Every owner of a business knows that healthy cashflow is crucial to its success. Although your accountant can be a great help when it comes to bookkeeping practices, there will be a number of issues they won’t have the automatic knowledge to deal with.
A business owner should make sure the eventual successor is made aware of the various financial options available to them and how to keep the business on its feet in good times and bad. No business is completely plain sailing, so a reliable funding partner can be a good contact to have.
At Ashley Finance we work with small businesses across all sectors to solve their individual funding problems. With a number of different funding solutions suited a real range of specific needs – whether it’s improving cash flow, paying a VAT bill or buying new equipment, finding the right funding doesn’t need to be a problem.
Succession planning is extremely important if you’re to ensure as smooth a transition as possible when you hand over the reins. Many small businesses can be fragile, subject to forces that are beyond their control. Get the wheels in motion early and you can rest assured that your business will flourish after you step down.